Fed chair Jerome Powell said yesterday that “now is not the time to be talking about exit” from the asset purchase program. He added, “another lesson of the global financial crisis, is be careful not to exit too early.”

“We’ll let the world know. We’ll communicate very clearly to the public and we’ll do so, by the way, well in advance of active consideration of beginning a gradual taper of asset purchases,” he added. “That wouldn’t be a reason to raise interest rates unless we see troubling inflation or other imbalances that could threaten achievement of our mandate.”

On the outlook, Powell said, “we’ve got to get through this very difficult period this winter with the spread of COVID, but as the vaccines go out and we get COVID under control, there’s a lot of reason to be optimistic.”

Boston Fed President Eric Rosengren said in an interview that “labor market is going to be stagnant for the next couple months until we have much more widespread vaccinations.” But going into Q2, ” I’m hoping enough people are vaccinated that we can start spending, particularly in those areas where we haven’t been able to spend,” he added.

Some sectors are most impacted by the coronavirus pandemic, including accommodation, food and entertainment. Rosengren said they will need more fiscal support, until vaccines make it possible for consumers to return. In particular, a fiscal program that provides grants to struggling businesses maybe one of the most effective ways to support mid-sized companies.

In a speech, Fed Vice Chair Richard Clarida outlined six features of the new framework adopted last fall.

• First, the lift off from the effective lower bound (ELB) interest rate was “delayed” until PCE inflation has risen to 2%, while other complementary conditions are met.
• Second, FOMC aims to achieve inflation moderately above 2% “for some time in the service of keeping longer-term inflation expectations well anchored at the 2 percent longer-run goal”.
• Third, monetary policy will “remain accommodative for some time after the conditions to commence policy normalization have been met.”
• Fourth, “policy will aim over time to return inflation to its longer-run goal, which remains 2 percent, but not below”.
• Fifth, inflation that averages 2 percent over time represents an ex ante aspiration of the FOMC, but not a time-inconsistent ex post commitment.
• Sixth, maximum employment is now defined as “the highest level of employment that does not generate sustained pressures that put the price-stability mandate at risk.”

Full speech here.

In a speech, Fed Governor Lael Brainard said that “given my baseline outlook, I expect that the current pace of purchases will remain appropriate for quite some time.” The outlook is “highly uncertain” and forecasts are “subject to revisions. The forward guidance is, thus, “outcome based and tied to realized progress on our goals.”

Looking ahead, “effective vaccines and additional fiscal support are important positive developments”. However, “the near-term outlook is challenging due to the resurgence of the pandemic, and the economy remains far from our goals.”

In particular, “the damage from COVID-19 is concentrated among already challenged groups”, she added. “The K-shaped recovery remains highly uneven, with certain sectors and groups experiencing substantial hardship.”

Full speech here.