(Reuters) – The U.S. economy could grow by around 5% to 6% this year, buoyed by increased vaccinations and strong fiscal aid, but the Federal Reserve is not going to pull back its support yet, Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday.
“For now, Fed policy is going to hold steady,” Harker said in remarks prepared for a virtual event organized by the Delaware State Chamber. “While the economic situation is improving, recovery is still in its early stages, and there’s no reason to withdraw support yet.”
Policymakers agreed last month to leave interest rates near zero and keep purchasing $120 billion a month in bonds until the economy makes “substantial further progress” toward the Fed’s goals for inflation and maximum employment.
A full economic rebound cannot happen until more people are vaccinated and the U.S. reaches herd immunity, he said. But the announcement Tuesday that federal health agencies recommended pausing use of Johnson & Johnson (NYSE:JNJ)’s COVID-19 vaccine after six women developed rare blood clots could make more people hesitant to receive the vaccines and slow down the recovery, Harker said.
Despite concerns among some economists and politicians that inflation could shoot higher as the economy heals, Harker said he is concerned with the opposite – inflation that is too low. Over the longer term, the Fed wants inflation to run above its 2% target to make up for long periods of falling short of the goal, Harker said.
“We’re not seeing inflation running out of control,” Harker said. “If it does, we’ll act accordingly.”
Source: Economy - investing.com
