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Fed's Kashkari sees 'much worse' downturn without more fiscal aid

FILE PHOTO: Minneapolis Federal Reserve Bank President Neel Kashkari poses during an interview with Reuters in his office at the bank's headquarters in Minneapolis, Minnesota, U.S., January 10, 2020. REUTERS/ Ann Saphir/File Photo

(Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday joined other U.S. central bankers in calling for more government aid, hours after President Donald Trump blocked any relief until after the election, and then partially reversed course to say he would support some targeted funds.

“There are enormous consequences” for not providing fiscal relief, Kashkari told CNBC. “If we don’t support people who have lost their jobs, then they can’t pay their bills and then it ripples through the economy and the downturn is much worse than it needs to be.”

Republicans have resisted new spending, worrying that giving the unemployed extra help could keep them from going back to work, or that expanding debt now could put the U.S. government in worse shape later.

Fed Chair Jerome Powell on Tuesday downplayed those concerns, saying said that while it was important for the United States to address its “unsustainable” fiscal path, the time to do so is not during a pandemic and a recession.

Wednesday morning Kashkari repeated it once more, calling for assistance that targets the unemployed, small businesses, and state and local governments. Cleveland Fed President Loretta Mester also called for more relief in an interview late Tuesday.

Democrats’ pandemic relief proposals include help to states, but Trump has resisted, saying their poor fiscal standing is the fault of their own mismanagement. He tweeted late Tuesday that he supports aid for small businesses, airlines, and $1,200 checks to Americans, employed or not.

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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