Fed officials expect the US economy to not only be hit hard in the coming months owing to the raging coronavirus pandemic but also experience sluggish recovery as the situation stabilizes. Business shutdowns and rising unemployment levels are expected to weigh heavily on the US economy in the near future.

In a recent interview with Reuters, Dallas Fed President Robert Kaplan remarked, “Because of the shock of this… will consumer behavior just be more cautious? It’s not just the safety concerns… it’s also financial and potentially job insecurity which might cause them to save more and spend less.”

Kaplan estimates that the US economy could contract by 4-5% by the end of this year. The cautious mood among consumers in the coming months could make recovery tougher as consumer consumption has been one of the key strengths that have supported economic growth in the US in recent years.

Chicago Fed President Charles Evans sounds a little more optimistic about the economy rebounding in H2 2020, boosted by the massive stimulus measures implemented both by the government as well as the Fed. However, if the pandemic extends over a longer period of time, it could send the US economy into a deeper and more severe downturn.

Meanwhile, according to Richmond Fed President Thomas Barkin, “Businesses will have to find a way to convince consumers to shop, or eat out, to travel, or go to a concert or a game. Many of these changes could increase costs and prices, but they could also reassure the public enough to bring business back to life.”