Fed’s Mester: Worst and speediest deterioration in the labor market many of us have ever seen

Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday that more progress needs to be made on testing and treatments to control the coronavirus outbreak before people can feel safe.

Reuters reports that Mester said the US economy can begin to grow again in the second half of the year, 

A reasonable baseline outlook is that as some of the stay-at-home restrictions are lifted, the economy will begin to grow again in the second half of this year and unemployment will begin to move down,

– Mester said in remarks prepared for delivery to the CFA Society Chicago.

However, a more pessimistic scenario, in which a surge in cases requires businesses to shut down again or the crisis leads to more bankruptcies or instability in the banking sector, is "almost as likely" if the necessary conditions with testing and medical care do not fall into place, she said.

"These are a lot of conditions, which is another way of saying there is considerable risk around this outcome," Mester said. "So I think it makes sense for policymakers to continue to monitor the economy, continue to support the flow of credit to households and businesses and the smooth functioning of financial markets."

Fed’s Mester says

This is the worst and speediest deterioration in the labor market many of us have ever seen.
Second quarter will show the most severe effects on the economy.
Baseline outlook is for economy to begin to grow again in 2nd half as some stay-at-home restrictions lifted.
More pessimistic scenario with surge in new coronavirus cases requiring more shutdowns is almost as likely as baseline.
Further direct fiscal support is needed to avoid longer-lasting damage to the economy.
There has been improvement in market functioning since fed launched emergency lending facilities.
She expects inflation to remain low for remainder of year and some time to come.

Meanwhile, US stocks ended considerably lower on Tuesday. Investors are alarmed that there are new clusters of COVID-19 cases which have emerged in countries that have begun to lift restrictions. Investors also weighed tensions between Washington and Beijing. 

• USD/JPY meeting strong resistance, DXY back below 100 level

• Wall Street Close: US stocks ended sharply lower, trade tensions weighing