St Louis Fed President James Bullard said in a presentation that “early arrival of vaccines suggests the health crisis will wane in the months ahead”. With vaccine distribution directed towards the most vulnerable, fatalities would also decline. Additionally, business have already learned to “produce at normal levels despite health restrictions”, contributing to rapid economic growth.
“Market-based inflation expectations have recovered from lows reached during March 2020,”he added. “TIPS-based breakeven inflation, based on CPI inflation measures, could move considerably higher and still be consistent with a PCE inflation outcome modestly above the 2% target.”
Bullard also told reporters, “the ingredients for higher inflation are in place”, with “very powerful fiscal policy”, a Fed that “wants to temporarily have inflation above target”, and the “economy poised to boom at the end of the pandemic”
