The recession resulting from the financial impact of the coronavirus crisis was the deepest one since the end of World War II, the vice chair of the Federal Reserve said Wednesday – but it may also “go into the record books as the briefest recession in U.S. history,” he added.
However, in remarks (delivered remotely) to the 2020 Annual Membership Meeting of the Institute of International Finance in Washington, D.C., Richard Clarida also acknowledged that recession triggered by the coronavirus crisis cast the economy into a deep hole, and that it will take some time — perhaps through most of 2021 — for the level of GDP to fully recover to its previous 2019 high.
“It will likely take even longer than that for the unemployment rate to return to a level consistent with our maximum-employment mandate,” he said.
He did note that the median projection for members of the Fed’s rate-setting Federal Open Market Committee (FOMC) is that by the end of 2023 the unemployment rate will have fallen to 4% and personal consumption expenditures inflation will have returned to 2%.
“Following the GFC (global financial crisis), it took more than eight years for employment and inflation to return to similar mandate-consistent levels,” he reminded the audience.
Nevertheless, Clarida acknowledged that the “economic outlook is unusually uncertain, and, moreover, that the ultimate course the economy follows will depend on the course of the virus, social-distancing norms, and mitigation efforts put in place to contain it.”
Federal Reserve Board Vice Chair Richard H. Clarida: U.S. Economic Outlook and Monetary Policy