The Federal Reserve has no plans to dial back its super-easy policy even as the incoming Biden administration lobbies for a new and massive round of stimulus that sets the economy up for faster growth once vaccines are fully rolled out.
Boston Fed Bank President Eric Rosengren on Friday was the latest to join the chorus at the US central bank calling for continued support for the economy, saying on Friday he welcomes President-elect Joe Biden's proposed $1.9 trillion stimulus package.
"It is a big package but I think it's appropriate," Rosengren told CNBC in an interview.
"The economy is in a lull right now," he said, citing a decline in jobs in December and a still-high unemployment rate of 6.7%.
"The mix that we have actually on fiscal and monetary policy is appropriate."
Rosengren's comments come after Fed Chair Jerome Powell on Thursday and other policymakers earlier in the week pushed back after a couple of their colleagues expressed optimism for sharp economic growth in the second half of the year and signaled they would consider tapering the Fed's asset purchase program in response.
"Now is not the time to be talking about exit," Powell said.
"I expect that the current pace of purchases will remain appropriate for quite some time," Fed Governor Lael Brainard said on Wednesday. Both noted the economy is still far from the Fed's goals of full employment and 2% inflation.
Analysts are penciling in faster economic growth now that vaccines are rolling out and with a Congress now controlled by Democrats more open to big government spending than Republicans typically are.
But vaccine rollout has been uneven and slow, with only about 3% of the US population receiving a first of two needed doses so far.
That experience, along with the appearance of new strains that are more transmissible and new expert forecasts that some 85% of the population may need to be inoculated before the pandemic can be quelled has brought Minneapolis Fed Neel Kashkari to his new view: that the economy will continue to suffer the effects of pandemic-related restrictions for another year.
"It's clear that the pandemic has a way to go and that many many people and many many businesses and hospitals need support until we can get this pandemic behind us, and get back to what we all know is normal, and hopefully strong growth from there," Kashkari told a virtual town hall held by the Minnesota Hospital Association. Americans, he forecast, will still need to wear masks and keep social distance through the end of the year.
The Fed next meets to discuss monetary policy on Jan. 26-27, and is expected to make no changes to its interest rate or bond-buying policy at that time.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU