(Reuters) – Boston Federal Reserve Bank President Eric Rosengren said social distancing efforts meant to contain the coronavirus outbreak have “stilled” the economy and could lead the unemployment rate to “rise dramatically.”
“Today, we’re witnessing the pandemic’s stark effects on public health. Meanwhile, the necessary response – social distancing – has stilled our strong economy, disrupting countless lives and livelihoods,” Rosengren said in remarks prepared for a virtual talk Wednesday afternoon. “It’s also been distorting the credit and liquidity flows that underpin our economy, threatening the greater pain of a full?blown financial crisis.”
The Federal Reserve is moving quickly to limit the virus’s effects on the economy and on financial markets by slashing rate to zero and rolling out several liquidity facilities meant to keep credit flowing through markets, Rosengren said.
For example, the Boston Fed opened a facility that lends money to banks so they can purchase assets from money market funds. Other programs being created by the New York Fed will make it easier for firms to issue debt.
In the meantime, business closures have led to layoffs, posing significant challenges for low-income workers who have fewer resources, Rosengren said.
“”We must continue to adapt as the crisis proceeds,” he said. “Unfortunately, we expect the unemployment rate to rise dramatically.”
Reporting by Jonnelle Marte; Editing by Chizu Nomiyama.