Fed’s Clarida: Banks Passed ‘Ultimate Stress Test’ With Flying Colors

The banking industry was able to pass the “ultimate stress test” with flying colors in March and April as the coronavirus spread, Federal Reserve Vice Chairman Richard Clarida said today at the American Bankers Association’s Unconventional Convention.

Clarida went on to say the economy also has been better able to adapt to the pandemic than expected. “The flow of macrodata received since May has been surprisingly strong, and GDP growth in the third quarter is estimated by many forecasters to have rebounded at roughly a 30% annual rate.”

He cautioned that despite the better than expected rebound it will take “perhaps another year for the level of GDP to fully recover to its previous 2019 peak. It will likely take even longer than that for the unemployment rate to return to a level consistent with our maximum-employment mandate,” he said.

“Forecasting is hard, but in our baseline projection we do see, certainly in comparison to the global financial crisis, a relativity prompt rebound,” Clarida said.