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Fed's Kaplan says mask-wearing is key to economic growth

Dallas Federal Reserve Bank President Robert Kaplan speaks during an interview in his office at the bank's headquarters in Dallas

(Reuters) - The key to ensuring a faster U.S. economic recovery is wearing masks to slow the spread of the coronavirus, Dallas Federal Reserve Bank President Robert Kaplan said on Friday,

"How the virus proceeds, and what the incidence is, is going to be directly related to how fast we grow," Kaplan told Fox Business Network in an interview. "While monetary and fiscal policy have a key role to play, the primary economic policy from here is broad mask wearing and good execution of these health care protocols; if we do that well, we'll grow faster."

A recent surge in COVID-19 cases in several U.S. states including Texas is raising concern that a recovery that likely began in May could falter if authorities re-impose lockdowns or consumers reduce spending out of fear that getting out and about could mean they get the sometimes fatal disease.

Goldman Sachs Group Inc <GS.N> economists have argued that a national mask mandate would boost the chances of a faster recovery. Governors in some states have imposed local mandates, though in some hotspots like Florida mask-wearing is voluntary.

Kaplan, who spent part of his career as a Goldman Sachs banker, reiterated his view that the U.S. economy will likely shrink by 4.5% to 5% in 2020, even after what he expects to be growth during the third and fourth quarters. And he said he was not surprised by the unexpected decline last month in U.S. producer prices, given high unemployment and unused productive capacity.

"I would expect we are going to have disinflation for some period of time until we get rid of this excess capacity," Kaplan said.

"The message I'd have today about the economy (is that) while monetary policy and fiscal policy are very important, they are not as important right now in us doing a good job of flattening this curve on the virus, and if we do that, we'll grow faster."

(Reporting by Ann Saphir; Editing by Chizu Nomiyama and Nick Zieminski)