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Federal Reserve Bank of Boston President Eric Rosengren lectured on the ongoing recession at a Tuesday Zoom event co-hosted by the Institute of Politics and the Kennedy School’s Mossavar-Rahmani Center for Business and Government.
Rosengren said the coronavirus-driven economic crisis has wreaked extensive damage on industries disrupted by social-distancing recommendations and travel bans.
“Many service sectors including hospitality, hotels, airlines, and restaurants, and retail have all been severely impacted by the pandemic,” he said. “That shouldn't be a surprise to anybody. Services require more personal interaction.”
“As a result, those economies that are most dependent on service production, which includes most of developed Europe and the United States...have been hit by this pandemic in a more severe way,” he explained.
The pandemic is disproportionately hurting the nation’s most vulnerable populations, according to Rosengren, including young workers, women, and minorities — all of whom are overrepresented in the hard-hit service sector.
“This has implications for the long-run productivity of the U.S. economy,” he said. “Because if the women leave the workforce and don't come back, it will affect our ability to grow more rapidly as the economy does recover.”
Rosengren compared America’s response to the economic crisis with approaches pursued by peer countries.
“In the United States, much of the regulatory focus coming out of the financial crisis was stopping very large organizations from failing,” he said. “Unfortunately, I'd say, unlike much of the rest of the world, there was not nearly as much focus on how to avoid the imbalances in the economy.”
Rosengren, a Federal Open Market Committee participant, said he does commend the Federal Reserve System’s move to lower interest rates with an eye on stimulating growth.
“I'm very supportive of the low rates that we have right now,” he said. “It's completely appropriate to have very accommodative monetary policy when the unemployment rate is high.”
Rosengren said that to brace itself against unanticipated and devastating events — like a pandemic — a country can maintain adaptive fiscal policies and keep “guardrails” in place.
“No one could have anticipated a pandemic,” he said. “But we need to be prepared for whenever those shocks do occur.”
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