Minutes of January 26-27 FOMC meeting noted that economic projection prepared by the staff for implied a “considerably stronger outlook for activity in 2021 relative to the December forecast”, incorporating the impact of additional fiscal support. Real GDP growth would “outpace that of potential over this period, leading to a considerable further decline in the unemployment rate”.

Also, “participants remarked that the prospect of an effective vaccine program, the recently enacted fiscal support, and the potential for additional fiscal actions had led them to judge that the medium-term outlook had improved”.

Nevertheless, “the economy remained far from the Committee’s longer-run goals and that the path ahead remained highly uncertain”. “It was likely to take some time for substantial further progress to be achieved.”

On inflation, “many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation,” the minutes said. Such moves “could temporarily raise measured inflation but would be unlikely to have a lasting effect.”

Full minutes here.

Boston Fed President Eric Rosengren said, “we are going to see somewhat of a pickup in inflation” in the coming months. He added that food and energy prices may go up as “certain areas of the economy are facing some shortages”.

However, Rosengren also emphasized what Fed want is “kind of the broad based inflation rate to be at a sustained level of 2%”. He didn’t expect that to happen this year. “I would be surprised if we see it before the end of next year,” he said.

Separately, Richmond Fed President Thomas Barkin said he is “quite optimism” on US outlook this year. The first third of the year will be most challenging. But the second phase around mid-year will see vaccinated people re-engaging in activities. Finally, the third third of the year should see a return to a more normal business environment.