Chicago Fed President Charles Evans said in a speech yesterday that real GDP would return to pre-pandemic level sometime in 2022. That is, “even after three years, my projected recovery places us below where the economy would have been had the virus not occurred”. Additionally, “some previously expected trend growth has been permanently lost.”
Also, despite the surprised job growth in May and recent positive economic data, it is too early to tell “how much of the improvement is simply timing” and “how much represents stronger underlying demand”. The outlook is highly uncertain and “other forecasts with more severe effects on economic activity are almost equally as plausible”. Regarding inflation, “some of the extreme price declines in March and April are likely behind us”. Besides, he expects “downward pressure on prices from resource slack to diminish in 2021 and 2022”.
Overall, while fiscal and monetary policy actions have already done a lot “more may be necessary.”
