Fed Sees Uncertain Economic Outlook as Virus Threat Returns
July 15, 2020
The strong rebound and optimistic hopes for a rapid economic recovery have begun to fade, according to the Federal Reserve’s latest Beige Book survey. The survey, based on anecdotal evidence from the Fed’s 12 regional bank, shows a growing uncertainty about the momentum of the economy and the possibility of waning demand as fears around coronavirus grow.
The report notes that the economic outlook of the contacts whose views inform the report were more uncertain than in the previous report. Activity in most sectors remains subdued. Employers are reporting new hiring, but businesses also noted additional layoffs and the difficulty in bringing workers back, such as safety concerns, a lack of childcare, and high unemployment benefits. The report also notes more workers are seeing reduced hours, pay cuts and periods of unpaid leave.
The Fed is concerned that this may hurt consumer demand and be a drag on inflation, which is already unlikely to hit the Fed’s 2% target any time soon.