Fed’s Rosengren says economy is more fragile than data suggests

(Market Watch) – Boston Fed President Eric Rosengren said Wednesday that he is less optimistic about the economic outlook than many of his colleagues, despite encouraging economic data over the summer.

The Fed’s median forecast is fairly upbeat, expecting the unemployment rate to drop to 7.6% by the end of the year and 5.5% at the end of 2021, along with a gradual return of inflation to the 2% target.

“My views are that the economy remains fragile,” Rosengren said, in a speech to the Boston Chamber of Commerce.

The Boston Fed president said his forecast for a slower recovery hinges on “several challenges” the economy could face in coming months.

“I am concerned that a second wave of COVID-19 infections this fall and winter is likely, which could cause some states to impose new restrictions on mobility and face-to-face interactions,” Rosengren said.

He said he was also worried that more spending from Congress to support the economy “seems unlikely to materialize anytime soon.”

Rosengren added that he expects financial spillovers from businesses impacted by the virus “will become a more significant headwind going forward,”

“I certainly hope this less-optimistic outlook turns out to be wrong,” the Boston Fed president said.

He said additional fiscal stimulus and continued monetary stimulus remains necessary.

Stocks were lower on Wednesday, with the Dow Jones Industrial Average DJIA, -0.52%   down 120 points.

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