Boston Fed chief: States’ rush to reopen the country slowed recovery

A top official at the Federal Reserve criticized the decision by many states to reopen businesses this spring before getting the virus fully under control, and said those choices have hindered an economic recovery in the U.S.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said states in the South and West that allowed businesses to reopen after shutting down for a brief period did register an initial burst of economic activity. But spikes in infection rates soon followed and economies in those states are now lagging those in the Northeast as consumers have become more cautious and bars and restaurants have been shut down again in some states.

Rosengren’s comments, delivered online Wednesday, are some of the most specific yet by a Fed official tying the health of the economy to the nation’s ability to control the virus. Fed Chair Jerome Powell has emphasized generally that recovery from the recession depends on conquering the pandemic, but Rosengren’s remarks delved into the sharp difference in infection rates, both within regions of the United States, and the U.S. compared with Europe.

“Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death — but are also likely to prolong the economic downturn,” Rosengren said in prepared remarks.

“Despite the sizable interventions by monetary and fiscal policymakers … the recovery may be losing steam, as activities in many states are once again restricted (officially or voluntarily) to slow the virus’s spread,” Rosengren said.