Fed sees possible economic boom if vaccine gets on track
One US Federal Reserve official says there is now a “clearer focus” about the economy’s path forward and a horizon for a fuller recovery. Another says the pandemic’s “endgame” is here. A third predicts 2021 will prove “impressive.”
After a catastrophic spell when economic conditions were so confounded by the coronavirus that the Fed stopped making projections altogether, US central bankers now like what they see.
Even as they concede the riots by supporters of President Donald Trump that shut down Congress last week and concerns about continued violence pose a risk, officials say the transition to a new administration on January 20 and a likely accelerating vaccine rollout have left them optimistic.
The incoming administration of President-elect Joe Biden has said it plans to speed vaccine distribution, and outgoing Trump administration officials may move as soon as today to recommend on its own that age limits be lowered and other rules be loosened so more people can get shots now.
For the Fed, even though the country’s short term political and health risks seem great, they have focused on the more positive prospects of the medium term — with some even suggesting the strength of the ensuing recovery may even accelerate their plans to pull on some of the steps taken this year to battle the coronavirus recession.
Even those arguing policy will likely remain on hold point to consumers’ still-amply-stuffed war chests from last year’s federal relief efforts, including a $900 billion re-topping of aid approved just before year end. “We have a trillion (dollars) in excess savings. We have checks coming in the mailbox. There will be enough demand” from consumers to keep the recovery on track, Fed Vice Chair Richard Clarida said last week in forecasting an “impressive” 2021.
If 2020 was when shutdowns and disease took the economy to “new and unfamiliar places,” Richmond Fed President Thomas Barkin said, “the future has finally come into clearer focus,” with vaccines likely leading to a fuller reopening by midyear.
Since the Fed last met in mid-December, there has been a whipsaw sequence of events around both the pandemic and US governance, matters both critical to the economy’s performance.
A massive surge in coronavirus cases has been offset by optimism over the initial distribution of two vaccines. Confirmation of the Democratic Party’s control of both the executive and legislative branches was offset by outgoing President Donald Trump’s effort to subvert the electoral outcome, reaching a crescendo in last Wednesday’s assault on the Capitol.