Coronavirus downturn has been rapid and sharp, says former Fed head Janet Yellen

Former US Federal Reserve chairperson Janet Yellen has said the economic downturn due to the coronavirus pandemic has been “rapid and sharp” and is “different” than any the country has faced.

Speaking at an online seminar hosted by the Brookings Institution, a research group based in Washington, Yellen said, “Every indication so far suggests there will be a huge plunge in output in the second quarter.”

“The decline will be reported in annual rate and could easily be 20 percent,” said the former federal reserve chief at the Webinar: COVID-19 and the Economy.

Yellen added that all the restrictions and lockdown could be lifted in the US by May after which things would come back to normal. However, she mentioned that “a longer period of confinement certainly [seemed] possible” as there could be a second wave of infections once the activities resume.

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Talking of the employment sector, Yellen said she was expecting higher percentages of unemployment due to the coronavirus outbreak.

“The depth of the recession, I think, will partly depend on what happens to overall financial conditions,” she said, adding that the coronavirus pandemic has already caused a significant “financial tightening”.

But she also mentioned that it was impossible to know at this point how deep the recession will be.

The depth of economic recession would depend on the length of the period for which the social distancing measures stay in place.