Ex-N.Y. Fed Chief Dudley Says Economic Outlook Is Deteriorating

(Bloomberg) -- The U.S. economy faces “slow going” with no additional fiscal support likely for several months, said former New York Fed President William Dudley.

“The outlook for the economy is deteriorating,” Dudley said Wednesday in an interview on Bloomberg Television with Joe Weisenthal, Romaine Bostic and Caroline Hyde. “The most likely scenario is that we continue to have a recovery with some downside risk of a double dip” recession amid worsening levels of coronavirus infections.

Dudley, a Bloomberg Opinion columnist, said that if Democrat Joe Biden wins the presidency as polls suggest, more fiscal stimulus may not arrive until after the inauguration in January, while the Fed’s ability to provide more monetary policy stimulus is limited.

“The Federal Reserve can clearly do more,” Dudley said. “The real question is how much of an impact would it actually have on the economy and we figure at this point not very much, because the Fed’s already accomplished most of what monetary policy can do to support the economy.”

Fed officials are expected to hold rates near zero after their two-day meeting next week, which starts a day later than usual because of the U.S. election on Nov. 3, while repeating their commitment to use the Fed’s full range of tools to support the economic recovery.

While insisting they are not out of ammunition, U.S. central bankers have repeatedly stressed that fiscal policy has an important role to play in helping the U.S. heal from the pandemic. Chair Jerome Powell urged lawmakers in an Oct. 6 speech to err on the side of doing more rather than less.

Dudley made exactly that point in an opinion piece published earlier Wednesday on Bloomberg Opinion: “No central bank wants to admit that it’s out of firepower. Unfortunately, the U.S. Federal Reserve is very near that point. This means America’s future prosperity depends more than ever on the government’s spending plans.”

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