Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Fed policymakers see risk from infections, not inflation

EconomyApr 08, 2021 04:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Senate Banking Committee hearing on Capitol Hill, Washington

By Ann Saphir and Howard Schneider

(Reuters) -The U.S. Federal Reserve plans to keep its super-easy policy in place even as data shows the economy kicking into higher gear, with policymakers predicting on Thursday that an expected increase in prices this year will fade on its own, and warning about the recent uptick in COVID-19 infections.

"Cases are moving back up here, so I would just urge that people do get vaccinated and continue socially distancing," Fed Chair Jerome Powell, who has had his shots, said at an economic forum during virtual International Monetary Fund and World Bank meetings. "We don't want to get another outbreak; even if it might have less economic damage and kill fewer people, it'll slow down the recovery."

Speaking at a separate event, St. Louis Federal Reserve Bank President James Bullard said the Fed should not even discuss changes in monetary policy until it is clear the pandemic is over, tying future Fed discussions tightly to the success of the vaccination effort.

The Fed has said it will keep buying $120 billion in bonds a month until it sees "substantial further progress" toward meeting the central bank's employment and inflation goals.

Bullard said he regards that as contingent on beating 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 off the sharpest downturn in decades just over a year ago, will determine the course of the recovery.

Some 3 million Americans are getting vaccinated every day, and a majority of older Americans at highest risk of dying from COVID-10 have been fully vaccinated.

That, along with last month's $1.9 trillion pandemic relief package and the Fed's near-zero interest rates, sets the economy up for what Fed officials expect to be the fastest growth in 40 years this year.

But new variants of the virus are driving surges in caseloads in swaths of the Midwest and Northeast particularly.

Minneapolis Fed President Neel Kashkari told the Economic Club of New York in yet another virtual event on Thursday that those variants, and the school and daycare center closures they could force, are the "biggest risks" to the U.S. recovery.

Meanwhile, much of the world has barely begun mass vaccinations, posing what policymakers said was another risk.

Fed policymakers do expect a surge in spending in coming months, along with bottlenecks in supply, to push prices higher this year.

They say that's unlikely to turn into the kind of upward spiral in prices that would constitute worrisome inflation and require the Fed to respond with rate hikes.

"We think there will be upward pressure on prices which may be passed along to consumers in the form of price increases - we think that that will be temporary," Powell said, noting that inflation has been low for 25 years, feeding into a psychology of low inflation expectations.

And despite a government report last week showing U.S. employers added nearly a million jobs last month, there are still nearly 9 million fewer employed people in the American economy than there were before the pandemic.

Powell said he would want to see "a string of months like that so we can really begin to show progress toward our goals."

The unevenness of the recovery, too, is a serious issue, Powell said, with minorities, women and workers in sectors like leisure and hospitality faring worse than others.

Fed policymakers boosted their forecasts for growth, inflation and employment this year, but Powell noted that would not necessarily feed into any policy change.

To judge whether it was time to reduce asset purchases, Powell said, "we are not really looking at forecasts for this purpose, we are looking at actual progress" on inflation and employment.

Fed policymakers see risk from infections, not inflation
 

Related Articles

Column: Rehabilitating macro hedge funds
Column: Rehabilitating macro hedge funds By Reuters - Apr 23, 2021

By Mike Dolan LONDON (Reuters) - For all the bad press, much-maligned hedge funds have had their best start to the year in decades, while mixed stock and bond funds flattered to...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Mike Chen
Mike Chen Apr 08, 2021 8:13PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The world leaders are shocked by his comments! LoL🤣
Joel Schwartz
Joel Schwartz Apr 08, 2021 7:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Realistically, inflation is a greater threat to the global economy than COVID. The FED is out of their element.
Roger Miller
Roger Miller Apr 08, 2021 6:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Correction, the risk is from the governments response to a rise in infections.
Casador Del Oso
Casador Del Oso Apr 08, 2021 5:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Most people think that getting vaccinated makes them invulnerable to all forms of the virus forever. They couldn't be more wrong.
Amine Fourali
Amine Fourali Apr 08, 2021 5:24PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I did not know that Powell is now an expert in health...why he does not focus on his job....
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email