Fed’s Brainard Says More Fiscal Aid Needed to Prevent ‘Scarring’

(Bloomberg) -- Federal Reserve Governor Lael Brainard said Tuesday that more government fiscal aid is needed to prevent deeper damage to a U.S. economy coping with a fresh surge in coronavirus cases.

The central bank is “committed to providing sustained accommodation” through ultra-low interest rates and asset purchases, Brainard said in the text of a speech. At the same time, “additional fiscal support is essential to bridge past Covid’s second wave in order to avoid labor market scarring, reductions in crucial state and local services, and bankruptcies,” she said.

The pandemic’s damage “risks entrenching a K-shaped recovery that is weaker overall,” she said, using a term for a rebound where inequality widens.

The remarks were part of a speech on the Fed’s efforts to update regulations around the Community Reinvestment Act, a law designed to address discriminatory lending practices.

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