Fed's Barkin says economy faces 'sinkhole' without more fiscal support

The US economy faces a much larger downturn than previously forecast if Congress is unable to provide longer-term fiscal support quickly to tens of millions of Americans who are currently jobless, Richmond Fed President Thomas Barkin said on Monday.

“Four months ago, when we did the first stimulus, we thought the economy faced a pothole and the stimulus put a plate over it so we could navigate. Now escalation of the virus may be making that pothole into a sinkhole and creating a need for a longer plate,” Barkin said in webcast remarks to the Northern Virginia Chamber of Commerce. “If Congress takes support away too abruptly … the unemployed, their landlords, the places they shop will then feel the full brunt.”

US central bank officials have become increasingly pessimistic about the short-term outlook for the economy amid a resurgence in coronavirus infections across the country and continuing deadlock in Congress on passing a new relief bill.