Fed’s Daly calls for more public spending, sees big payoff

(C) Reuters. FILE PHOTO: San Francisco Federal Reserve Bank President Mary Daly poses in San Francisco

(Reuters) – San Francisco Federal Reserve President Mary Daly on Monday called on fiscal policymakers to boost spending on healthcare, education and digital infrastructure, even as she signaled she expects the U.S. central bank to keep interest rates low and do more if needed to help the economy.

The U.S. Congress has allocated nearly $3 trillion in rescue programs for an economy reeling from the novel coronavirus outbreak, which has killed more than 115,000 people across the nation and prompted large parts of the country to shut down for months, throwing tens of millions out of work.

“Much more will be needed in order to build a strong economic foundation that will allow a full recovery and sustained expansion,” Daly said in remarks prepared for delivery to a virtual event held by the National Press Club. With financing spending relatively cheap and easy because of low interest rates, Daly said “the payoff is potentially huge.”

U.S. central bankers like Daly often shy away from calling outright for more government spending, preferring to concentrate on their own writ of monetary policy. Daly’s call for more public investments stood out for its specificity and its emphatic tone.

She also signaled the Fed would, for its part, also do more, particularly compared with the last post-crisis recovery when it fretted about allowing unemployment to fall as far as it did, but ultimately discovered few inflation pressures.

“Letting the economy run past what we thought was possible has tremendous benefits,” she said. “I expect our current stance of highly accommodative monetary policy to continue until the economy has largely recovered what’s been lost due to the virus,” Daly said, noting that more than 20 million people have lost their jobs since the crisis began, millions more have dropped out of the workforce altogether, and many businesses have shut, some likely forever.