The U.S. economy faces a “serious risk” of stagnating for an extended period of time and “it’s worth pulling out all the stops” on fiscal stimulus, said Federal Reserve Bank of San Francisco President Janet Yellen.
“The current downturn is likely to be far longer and deeper than the ‘garden-variety’ recession,” Yellen said in the text of a speech today in San Francisco. “If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now.”
Yellen’s remarks indicate that support for new stimulus to revive the economy is gaining momentum within the central bank. Chicago Fed Bank President Charles Evans endorsed such policy yesterday, following Fed Chairman Ben S. Bernanke’s lead in October.
“Although our economy is resilient and has bounced back quickly from downturns in the past, the financial and economic firestorm we face today poses a serious risk of an extended period of stagnation,” which may intensify financial-market conditions, Yellen, 62, said during the annual meetings of the Allied Social Science Associations and the American Economic Association.
“It’s worth pulling out all the stops to ensure those outcomes don’t occur,” she said.