(Reuters) – The US Federal Reserve intends to maintain its super-comfortable policy, even as data shows the economy is starting to pick up speed, and policymakers predict Thursday that an expected rise in prices this year will fade by itself , and warns of the recent increase in COVID-19 infections.
“Business is moving back here, so I just want to insist that people be vaccinated and move on socially,” Fed Chairman Jerome Powell, who had his shots fired, said at an economic forum during virtual meetings of the International Monetary Fund and the World Bank said. ‘We do not want to have another outbreak; even if it will have less economic damage and kill fewer people, it will delay the recovery. ”
James Bullard, president of the St. Louis Federal Reserve Bank said at a separate event that the Fed should not even discuss changes in monetary policy until it is clear that the pandemic is over, which should strongly link future Fed discussions to the success of the vaccination effort.
The Fed has said it will buy $ 120 billion in bonds a month, until it sees significant further progress in achieving the central bank’s job and inflation targets.
Bullard said he considers it dependent on defeating the coronavirus. “We have to get the pandemic behind us first,” he said. “There are still risks, and things could go in a different direction.”
The Fed has long said the virus, which touched on the sharpest downturn in decades just over a year ago, will determine the course of the recovery.
About 3 million Americans are vaccinated every day, and a majority of older Americans at greatest risk of dying from COVID-10 are fully vaccinated.
That, coupled with the $ 1.9 billion pandemic relief package last month and the Fed’s near-zero interest rates, allows the economy for what Fed officials will expect the fastest growth in 40 years this year.
But new variants of the virus are leading to an increase in effects in especially the Middle East and Northeast.
Neel Kashkari, president of the Fed of Minneapolis, said in another virtual event at the New York Economic Club on Thursday that these variants and the closure of the school and daycare they could enforce are the “biggest risks” for the U.S. has been restored.
Meanwhile, much of the world has barely begun mass vaccinations, which policymakers say is still a risk.
Fed policymakers expect an increase in spending in the coming months, coupled with supply-side bottlenecks, to push prices higher this year.
They believe that this is unlikely to change in the kind of rising prices that will shape worrying inflation and that the Fed will have to respond with interest rate hikes.
“We think there will be upward pressure on prices that can be passed on to consumers in the form of price increases. We think it will be temporary,” Powell said, noting that inflation has been low for 25 years and is a psychology. of low inflation expectations.
And despite a government report showing last week that U.S. employers added nearly a million jobs last month, there are still nearly 9 million fewer people in the U.S. economy than before the pandemic.
Powell said he wants to see a number of months like this so we can really start moving toward our goals. “
The inequality of recovery is also a serious issue, Powell said, with minorities, women and workers in sectors such as leisure and hospitality performing worse than others.
Fed policymakers have raised their forecasts for growth, inflation and employment this year, but Powell noted that this would not necessarily contribute to any policy change.
Judging by whether it was time to reduce asset purchases, Powell said, “We are not really looking at forecasts for this purpose, we are looking at real progress” in terms of inflation and employment.
Reporting by Ann Saphir with Reporting by Dan Burns and David Lawder Editing by Chizu Nomiyama and Jonathan Oatis