The stimulus plan proposed by Joe Biden is the right medicine for an economy that is expected to experience poor growth in the first half of 2021, said Eric Rosengren, president of the US Federal Reserve in Boston, on Friday.
When the first central bank official called to speak publicly about the Biden plan, he said he was comfortable with the aggressive fiscal measures despite a cost of nearly $ 2 trillion that will put an already indebted federal government deeper in the red. satisfied.
“It’s a big package, but I think it’s appropriate,” he told CNBC’s Steve Liesman during an interview on The Exchange. “The economy is currently in a doldrums.”
The Biden plan calls for spending $ 1.9 trillion on a range of measures directly related to the economic impact of the Covid-19 pandemic, such as direct cash payments and expanded unemployment benefits, as well as tangential measures such as increases in the federal minimum wage and cash in schools.
Fed officials have been calling on Congress to provide more tax aid for months.
“Although it’s a very big package, I think until we get to the point where people have been vaccinated, where businesses have been bridged and where many of the unemployed are back to work, we need expansionary fiscal policies.” Said Rosengren. “And to the extent that it targets the parts of the economy hardest hit by the pandemic, this is the appropriate fiscal policy measure right now.”
While it is uncertain how much spending Congress will approve, the money will be used in an economy that Rosengren believes will struggle in the first half of the year and then rebound strongly.
Still, he said that fiscal and monetary policy is not the problem right now, but that “we have the wrong pandemic policy”.
“Too many people are infected and we’re too slow to be shot in the arm,” he said.
Fed policy will now be accommodative and this is unlikely to change anytime soon. Chairman Jerome Powell reiterated his belief on Thursday that rate hikes or changes to the central bank’s purchase program will come anytime the Fed tries to meet its employment and inflation targets.
While Rosengren has warned in the past about financial stability issues that could arise from simple Fed policy, he also said that was not his main concern now, as government bond and mortgage-backed securities purchases contributed to the recovery.
“My concerns about financial stability really relate to what happens when the economy is much stronger than it is today,” he said.