A number of senior Federal Reserve officials this Wednesday intensive statement. And last week’s Fed meeting statement and Fed Chairman Powell’s attitude, they all conveyed the economy is expected to accelerate recovery, inflation will climb, but trying to reduce the possibility of tapering QE actions such as interest rate hikes in the last two years.
Cleveland Fed President Loretta J. Mester, who has a vote on the Fed’s Monetary Policy Committee FOMC next year, said that even if prices rise and may exceed the Fed’s target level of 2 percent, it will not be enough to consistently meet the Fed’s interest rate guidance requirements regarding rate hikes.
“I don’t think a rise in inflation like I expect this year will be the kind of sustained rise that would meet our policy rate guidance of that type.”
Meister expects U.S. inflation to exceed 2 percent this year alone, but to fall back to less than 2 percent next year, in 2022, and gradually rise above 2 percent by 2023. She pointed out that the price increases of some commodities stemming from supply chain disruptions and higher energy prices will also push up inflation.
Meister believes that the U.S. economic outlook is bright, but there are still some risks. She mentioned that the recovery in the labor market is uneven, and many low-income workers have not yet found jobs again. And there have been widespread reports of labor shortages in businesses, with some workers wary of returning to work because of concerns about the new coronavirus or childcare.
Meister also expects the U.S. to enter a so-called “post-vaccination” phase of economic recovery in the third quarter of this year, in which the recovery will be more widespread, as vaccine distribution continues in the coming months.
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