A full economic recovery will be 'very difficult' as long as COVID-19 remains a threat, Fed president Rosengren says

• "As long as the virus poses significant threats to public health, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk," Boston Federal Reserve Bank President Eric Rosengren said Wednesday in prepared comments he's scheduled to deliver to the South Shore Chamber of Commerce in Massachusetts.
• Rosengren said that not containing COVID-19 is likely to prolong the pandemic recession.
• He also defended the Fed's Main Street Lending Program, saying that modest early activity is not a sign of failure.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, offered a gloomy economic outlook in the text of a speech he's due to deliver to the South Shore Chamber of Commerce in Massachussetts on a Wednesday video conference.

"As long as the virus poses significant threats to public health, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk," Rosengren said in the text of the speech.

He added that the forecast for the US economy in the fall is "quite uncertain," but that it's likely that the slowdown seen recently in high-frequency indicators will continue.

"Currently, we have an unemployment rate above 10%, and because of the continued community spread of the virus, I am concerned that the pandemic will limit the ability of the economy to recover quickly," he said.

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In addition, this could mean that temporary layoffs become permanent, meaning out-of-work Americans will face the "difficult task of finding a new job in a changed economic environment."

In addition to giving his economic outlook, Rosengren took the opportunity to defend the Fed's Main Street Lending Program.

"Some seem eager to suggest that the Main Street program's modest initial activity is evidence of failure," he said. "I completely disagree."

The program, designed to send as much as $600 billion in loans to small and medium-sized businesses, had a slow rollout and rocky start, The Washington Post reported. Near the end of July, the program had allocated only about $77 million in loans to eight companies.

"The numbers seem consistent with a gradual pace of initial activity that is more recently expanding as participants become familiar with the program parameters," Rosengren said Wednesday. "As borrowers and banks have become more familiar with the program, we have seen a steady increase in loans submitted to our portal."

Recently, the central bank has seen an increase in program activity, and currently has more than $856 million in active loans and more than $250 million either committed or settled, according to Rosengren.