May 12, 2020 / 9:01 PM / in 24 days

Fed's Mester says virus testing and treatments needed for economy to recover in 2nd half

May 12 (Reuters) - More progress needs to be made on testing and treatments to control the coronavirus outbreak before people can feel safe and the U.S. economy can begin to grow again in the second half of the year, Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday.

“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.” (Reporting by Jonnelle Marte; Editing by Leslie Adler)

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