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Fed head says US economy will need support “for a while”

The president of the United States Federal Reserve (Fed), Jerome Powell, affirmed that the coronavirus pandemic left a « significant footprint » on inflation, so it is not a threat to the economy, while he pointed to an « improvement » in the outlook for the second half of the year.

« The pandemic has left a significant mark on inflation (…) For some of the sectors that have been most severely affected, prices remain particularly weak, » Powell said in his appearance before the banking committee of the US Senate to offer its semi-annual report on monetary policy.

« In general, and in the accumulated of the last twelve months, inflation is still below our objective of 2% in the long term, » he stressed.

The Fed chairman insisted that the US economy is still « far » from its recovery goals and stressed that it will take « a while » to return to pre-pandemic levels, so the extraordinary monetary stimulus will be maintained.

The US central bank abruptly lowered benchmark interest rates to around 0% with the arrival of the pandemic in March 2020, while also boosting multi-million dollar injections of liquidity through the purchase of debt.

However, he showed cautious optimism for the future.

« While we should not underestimate the challenges we currently face, developments point to an improved outlook for later in the year. In particular, whether continued progress in vaccines helps accelerate the return to normal activities, » Powell said .

The latest central bank forecasts point to 4.2% economic growth in 2021, after the 2.4% drop recorded last year.

The unemployment rate, which went from 3.5% in February 2020 to 14.7% in April of the same year, when the COVID-19 pandemic had a greater impact, has been decreasing every month since then and in the The last three months of last year remained close to 7%, which indicates a stagnation in the labor market.

The Fed’s next monetary policy meeting is scheduled for March 16-17.