In a speech, Cleveland Fed President Loretta Mester said “prospects are good for a much more favorable 2021” with vaccines distribution underway and further fiscal relief. Though, “the next few months will be challenging ones” with increasing new cases of coronavirus, which are “putting strains on our healthcare system and limiting economic activity. ”
She added that “so far the recovery has generally been stronger than anticipated”. This suggests that “we may have been underestimating the economy’s resilience and underlying momentum, as well as the ability of households and businesses to adapt to this unprecedented environment.” Recovery is expected to continue, but uneven over the year.
The post-vaccination phase of recovery is expected to “continue over the next few years, with growth above trend, declines in the unemployment rate, and gradually rising inflation”.
Overall, “monetary policy will need to remain highly accommodative for quite some time because achieving our monetary policy goals is likely to be a journey and not a sprint… The FOMC is, and will remain, fully committed to using our policy tools to achieve our goals, in support of a broad-based and sustainable recovery.”
