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    Debate Looms Over I.M.F.: Should It Do More Than Put Out Fires?

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    As the International Monetary Fund gets set for its annual meeting, economists ask if it’s time to update its mandate as the world’s financial crisis responder.Lopsided access to vaccinations, extreme economic inequality, rising food prices and staggering debt are on the agenda when the International Monetary Fund and the World Bank gather for their annual meetings in Washington next week.A pressing issue not in the official program is the controversy that has been swirling for weeks around the chief of the I.M.F., Kristalina Georgieva, threatening her leadership.An investigation last month accused Ms. Georgieva of rigging data to paint China as more business friendly in a 2018 report when she was chief executive at the World Bank. Ms. Georgieva has denied any wrongdoing.The scandal has focused on the bank’s credibility — billion-dollar decisions can be made on the basis of its information — as well as Ms. Georgieva’s culpability.But lurking behind the debate over her future are foundational questions about the shifting role of the I.M.F., which has helped guide the planet’s economic and financial system since the end of World War II.Once narrowly viewed as a financial watchdog and a first responder to countries in financial crises, the I.M.F. has more recently helped manage two of the biggest risks to the worldwide economy: the extreme inequality and climate change.Some stakeholders, though, have chafed at the scope of the fund’s ambitions, and how much it should venture onto the World Bank’s turf of long-term development and social projects. And they object to what’s perceived as a progressive tilt.“There is a modernizing streak here running through major financial institutions which is creating a kind of tension,” said Adam Tooze, a historian at Columbia University and the author of “Shutdown: How Covid Shook the World’s Economy.”Other pressures weigh on the agency as well. Washington is still home to the I.M.F.’s headquarters, and the United States is the only one of the 190 member countries with veto power, because it contributes more money than any other. But its dominance has been increasingly challenged by China — straining relations further tested by trade and other tensions — and emerging nations.The willingness of the Federal Reserve and other central banks to flush trillions of dollars into the global economy to limit downturns also means that other lenders, aside from the I.M.F., have enough surplus cash on hand to lend money to strapped nations. China has also greatly expanded its lending to foreign governments for infrastructure projects under its ambitious Belt and Road Initiative.At the same time, long-held beliefs like the single-minded focus on how much an economy grows, without regard to problems like inequality and environmental damage, are widely considered outdated. And the preferred cocktail for helping debt-ridden nations that was popular in the 1990s and early 2000s — austerity, privatization of government services and deregulation — has lost favor in many circles as punitive and often counterproductive.The debate about the role of the I.M.F. was bubbling before the appointment of Ms. Georgieva, who this month started the third year of her five-year term. But she has embraced an expanded role for the agency. A Bulgarian economist and the first from an emerging economy to head the fund, she stepped up her predecessors’ attention to the widening inequality and made climate change a priority, calling for an end to all fossil fuel subsidies, for a tax on carbon and for significant investment in green technology.She has argued that however efficient and rational the market is, governments must step in to fix built-in flaws that could lead to environmental devastation and grossly inequitable opportunity. Sustainable debt replaced austerity as the catchword.When the coronavirus pandemic brutally intensified the slate of problems — malnourishment, inadequate health care, rising poverty and an interconnected world vulnerable to environmental disaster — Ms. Georgieva urged action.Here was “a once in a lifetime opportunity,” she said, “to support a transformation in the economy,” one that is greener and fairer.The I.M.F. opposed the hard line taken by some Wall Street creditors in 2020 toward Argentina, emphasizing instead the need to protect “society’s most vulnerable” and to forgive debt that exceeds a country’s ability to repay.I.M.F. headquarters in Washington, where Republicans have bristled at Ms. Georgieva’s agenda.Daniel Slim/Agence France-Presse — Getty ImagesThis year, Ms. Georgieva managed to create a special reserve fund of $650 billion to help struggling nations finance health care, buy vaccines and pay down debt during the pandemic.That approach has not always sat well with conservatives in Washington and on Wall Street.Former President Donald J. Trump immediately objected to the new reserve funds — known as special drawing rights — when they were proposed in 2020, and congressional Republicans have continued the criticism. They argue that the funds mostly help American adversaries like China, Russia, Syria and Iran while doing little for poor nations.Ms. Georgieva’s activist climate agenda has also run afoul of Republicans in Congress, who have opposed carbon pricing and pushed to withdraw from multinational efforts like the United Nations Framework Convention on Climate Change and the Paris climate agreement.So has her advocacy for a minimum global corporate tax like the one that more than 130 nations signed on Friday.In July, Laurence D. Fink, who runs BlackRock, the world’s largest investment management company, and was at odds with the I.M.F.’s stance on Argentina, called the fund and the World Bank outdated and said they needed “to rethink their roles.”The investigation into data rigging at the World Bank focused on what is known as the Doing Business Report, which contains an influential index of business-friendly countries. WilmerHale, the law firm that conducted the inquiry, said various top officials had exerted pressure to raise the rankings of China, Saudi Arabia, the United Arab Emirates or Azerbaijan in the 2018 and 2020 editions.The law firm reported that Ms. Georgieva was “directly involved” with efforts to improve China’s rating for the 2018 edition. She said WilmerHale’s report was inaccurate and rejected its accusations. The I.M.F. executive board is reviewing the findings.The United States, which is the fund’s largest shareholder, has declined to express support for her after the allegations. Ahead of a meeting of the I.M.F. board on Friday, Ms. Georgieva maintained strong support from many of the fund’s shareholders, including France, which had lobbied hard for her to get the job in 2019. Late Friday, the I.M.F. released a statement saying the board would “request more clarifying details with a view to very soon concluding its consideration of the matter.”In Congress, Republicans and Democrats called for the Treasury Department to undertake its own investigations. A letter from three Republicans said the WilmerHale inquiry “raises serious questions about Director Georgieva’s ability to lead the International Monetary Fund.”Several people sprang to her defense, including Shanta Devarajan, an economist who helped oversee the 2018 Doing Business Report and a key witness in the investigation. He wrote on Twitter that the law firm’s conclusions did not reflect his full statements, and that the notion that Ms. Georgieva had “put her thumb on the scale to benefit one nation is beyond credulity.”“It was her job to ensure the final report was accurate and credible — and that’s what she did,” Mr. Devarajan added.In an interview, he said critics had used the investigation to discredit Ms. Georgieva. The problem, he said, is “how people may have chosen to read the findings of the report and use that to criticize Kristalina’s credibility and leadership.”Mr. Devarajan was not the only one to make the case that the controversy was functioning in some ways as a proxy for the contest over the I.M.F.’s direction. Jeffrey Sachs, director of the Center for Sustainable Development at Columbia, wrote in The Financial Times that Ms. Georgieva was receiving “McCarthyite treatment” by “anti-China forces” in Congress.Whatever role one might prefer for the I.M.F. — traditional, expanded or something else entirely — the scandal is both a distraction and a threat.Nicholas Stern, a British economist who formerly served as the chief economist and senior vice president of the World Bank, said this controversy could not come at a worse moment.“The coming few years are of vital importance to the future stability of the world economy and environment,” he wrote in a letter to the I.M.F. board in support of Ms. Georgieva. “This is as decisive a period as we have seen since the Second World War.”Alan Rappeport More

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    Kristalina Georgieva’s tenure at the I.M.F. is in limbo as its board weighs allegations against her.

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    WASHINGTON — The tenure of Kristalina Georgieva as managing director of the International Monetary Fund faces a pivotal moment on Friday, when the fund’s executive board will meet to decide whether she should continue to be its leader after allegations that she pressured staff to manipulate a report to placate China when she was a top World Bank official.This week, the executive board spent hours questioning Ms. Georgieva about her actions. It also interviewed lawyers from WilmerHale, the firm that conducted the World Bank’s internal review of the circumstances surrounding the Doing Business survey. The review, published last month, concluded that Ms. Georgieva had played a central role in meddling with the report, raising questions about her judgment and ability to continue leading the I.M.F.Ms. Georgieva has denied the allegations, and in a meeting with the board on Wednesday she offered a forceful rebuttal.“The WilmerHale Report does not accurately characterize my actions with respect to Doing Business 2018, nor does it accurately portray my character or the way that I have conducted myself over a long professional career,” Ms. Georgieva said in a statement to the board, which was obtained by The New York Times.Mr. Georgieva, a Bulgarian economist who assumed the top I.M.F. job in 2019, also criticized the nature of the World Bank investigation and said she had been misled.“The email from WilmerHale requesting my participation said clearly that I was not a subject of the investigation and assured me that my testimony was confidential and protected by World Bank staff rules, which guarantee due process,” Ms. Georgieva said. “None of this proved to be true.”The controversy has raised questions about China’s influence in multilateral institutions. It has also become a distraction for the I.M.F. as it is trying to help coordinate the global economic response to the pandemic. Prominent economists have publicly debated whether Ms. Georgieva should step down. The Economist magazine called last month for her resignation.The United States, which is the fund’s largest shareholder, has yet to offer public support, and officials have declined to say if she should stay in the job.“There is a review currently underway with the I.M.F. board, and Treasury has pushed for a thorough and fair accounting of all the facts,” said Alexandra LaManna, a Treasury spokeswoman. “Our primary responsibility is to uphold the integrity of international financial institutions.”Former World Bank officials have described Ms. Georgieva as a polarizing figure, but she has generally won praise at the I.M.F. When she assumed the job, she quickly restructured the fund to give her more direct control over its daily operations. That included removing David Lipton, a longtime I.M.F. official and its first deputy managing director, before his term expired.Mr. Lipton is now a top adviser to Treasury Secretary Janet L. Yellen, who will have significant input as to whether Ms. Georgieva remains in the job.Treasury officials have been debating how to respond to the allegations against Ms. Georgieva. A person familiar with the deliberations said that Mr. Lipton has been among the officials who have been supportive of Ms. Georgieva, who he worked closely with while she was at the World Bank and he was at the I.M.F.Republicans and Democrats in Congress have expressed concern about Ms. Georgieva’s actions at the World Bank and called on Ms. Yellen to ensure “full accountability.”The United States traditionally selects an American to be president of the World Bank, while the managing director of the I.M.F. is usually from Europe.The I.M.F.’s executive board could make a decision about whether it continues to have confidence in Ms. Georgieva when it meets on Friday.The annual meetings of the World Bank Group and the International Monetary Fund take place next week. More

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    I.M.F. World Economic Outlook Forecasts 6 Percent Global Growth

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    The International Monetary Fund warned on Tuesday that the gap between rich and poor countries was widening amid the pandemic, with low vaccination rates in emerging economies leading to a lopsided global recovery.The I.M.F. maintained its 2021 global growth forecast of 6 percent in its latest World Economic Outlook report, largely because advanced economies, including the United States, expect slightly faster growth than the global body previously forecast. Economic growth in developing countries is expected to be more sluggish, and the global body said the spread of more contagious variants of the virus posed a threat to the recovery. It called on nations to work together to accelerate the protection of their citizens.“Multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics and therapeutics,” Gita Gopinath, the I.M.F.’s chief economist, wrote in the report. “This would save countless lives, prevent new variants from emerging and add trillions of dollars to global economic growth.”The I.M.F. projected that the U.S. economy will expand 7 percent in 2021. The euro area was projected to expand 4.6 percent and Japan 2.8 percent. Rapid expansion was expected for China, at 8.1 percent, and India, 9.5 percent, but both of their outlooks have been downgraded since April. The outlook in China was lowered because of a scaling back of public investment, while India was downgraded because of a severe second wave of the virus slowing the recovery.The global expansion in 2022 was projected to be stronger than previously forecast, with growth of 4.9 percent. That, too, will be led by advanced economies, the I.M.F. predicted.More than a year after the coronavirus emerged, economic fortunes are closely tied to how successfully governments have been at providing fiscal support and acquiring and deploying vaccines. The I.M.F. said about 40 percent of the population in advanced economies had been fully vaccinated, while that figure is just 11 percent or less in emerging markets and low-income developing economies. Varying levels of financial support from governments are also amplifying the divergence in economic fortunes.The I.M.F.’s executive board announced this month that it had approved a plan to issue $650 billion worth of reserve funds that countries could use to buy vaccines, finance health care and pay down debt. If finalized in August, as expected, the funds should provide additional support to countries that have been lagging behind in combating the health crisis.Concerns about price increases have grabbed headlines in the United States and elsewhere, but the I.M.F. said it continued to believe that the recent bout of inflation was “transitory.” The organization noted that jobless rates remained below their prepandemic levels and that long-term inflation expectations remained “well anchored.” Ms. Gopinath said that predicting the path of inflation was subject to much uncertainty because of the unique nature of the economic shock that the world had faced.“More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation,” Ms. Gopinath said.As the Federal Reserve prepared to meet on Tuesday and Wednesday, she advised central banks to be nimble in setting monetary policy and urged them not to raise interest rates too soon.“Central banks should avoid prematurely tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of de-anchoring,” Ms. Gopinath added.During a press briefing on Tuesday, I.M.F. officials said they had been observing how supply shortages were depressing manufacturing activity and hurting sectors such as the automobile industry.While the I.M.F. expects inflation in the United States to remain high this year and normalize by next year, it is looking for signs that rising prices could “de-anchor” from the Fed’s 2 percent target. That will become clear, it said, if medium-term inflation expectations begin to rise and if higher prices become locked into wages and business contracts. Officials are also watching to see if the recent sharp increase in house prices continues to lead to higher rents, which would lift the inflation outlook.Mutations of the virus remain the most daunting challenge facing the global economy. The I.M.F. projected that highly infectious variants, if they emerged, could derail the recovery and wipe out $4.5 trillion in gross domestic product by 2025.The brunt of that pain would most likely be felt in the poorest parts of the world, which have been hardest hit by the initial waves of the pandemic.“It was already diverging, and that has exacerbated in this period,” Ms. Gopinath said of global inequality. “It is a reflection of some very big fault lines that are growing.” More

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    Janet Yellen Warns That Coronavirus Variants Threaten Global Recovery

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    At the end of a gathering of the finance ministers of the Group of 20 nations, the U.S. Treasury secretary called for an acceleration of vaccine distribution worldwide.Treasury Secretary Janet L. Yellen said on Sunday that coronavirus variants could hinder the global economic recovery and called for a stepped-up effort to vaccinate the world’s population.Luca Bruno/Associated PressVENICE — Treasury Secretary Janet L. Yellen said on Sunday that she was concerned that coronavirus variants could derail the global economic recovery and called for an urgent push to deploy vaccines more rapidly around the world.Her comments, made at the conclusion of a gathering of the finance ministers of the Group of 20 nations, came as the highly contagious Delta variant of the coronavirus was driving outbreaks among unvaccinated populations in countries such as Australia, Indonesia, Malaysia and Portugal. Delta is also now the dominant variant in the United States.“We are very concerned about the Delta variant and other variants that could emerge and threaten recovery,” Ms. Yellen said. “We are a connected global economy. What happens in any part of the world affects all other countries.”Many cities and countries have started to declare victory against the pandemic, easing restrictions and returning to normal life. But Ms. Yellen warned that the public health crisis was not over.She said that the world’s top economic officials had spent much of the weekend in Venice discussing how they could improve vaccine distribution, with the goal of getting 70 percent of the world inoculated by next year. Ms. Yellen noted that many countries had been successful in financing the purchase of vaccines, but that the logistics of getting them into people’s arms were falling short.“We need to do something more and to be more effective,” she said.The spread of variants has started to dampen optimism about the trajectory of the recovery.Analysts at Capital Economics said this week that they planned to lower their economic growth outlook for the year to below 6 percent.The spread of new coronavirus variants has “raised doubts about the pace of real economic growth in the second half of this year and beyond,” Paul Ashworth, the chief North America economist at Capital Economics, wrote in a research note.The International Monetary Fund said that it was maintaining its projection for 6 percent global growth this year, but it warned that growth was being suppressed in developing countries where infection rates were surging.“The divergence across economies is intensifying,” Kristalina Georgieva, the managing director of the I.M.F., said on Saturday. “Essentially, the world is facing a two-track recovery.”Some finance ministers also expressed concern over the weekend that variants and slow vaccine uptake could upend the recovery. That concern was highlighted as a downside risk to the global economy in the joint statement that the group released.“The single hurdle on the way to a quick, solid economic rebound is the risk of having a new wave of pandemics,” said Bruno Le Maire, the French finance minister. “We all have to improve our vaccination performance.”The I.M.F. executive board approved a plan last week to issue $650 billion worth of reserve funds that countries could use to buy vaccines and to finance health care initiatives.Ms. Yellen said that she had pressed her Group of 20 counterparts to accelerate “equitable” delivery and distribution of vaccines, diagnostics and therapeutics to ensure that low- and middle-income countries could fight flare-ups of the virus.Policymakers at the meeting this weekend also spent time focusing on new investments to prepare for future pandemics. Ms. Yellen said that, while this was important, there was more that needed to be done in the near term.“Certainly variants represent a threat to the entire globe,” she said. More

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    I.M.F. Board Backs $650 Billion Aid Plan to Help Poor Countries

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    The expansion of emergency reserves to help fund vaccines and pay down debt is politically contentious in the United States.VENICE — The International Monetary Fund took a step on Friday toward easing widening global inequality and helping poor nations get access to vaccines, saying its executive board approved a plan to issue $650 billion worth of reserve funds that countries can use to buy vaccines, finance health care and pay down debt.The decision comes at a pivotal moment as Covid-19 infections continue to spread among populations that have not been inoculated and as more contagious variants of the coronavirus are posing new health threats. The pandemic has drained the fiscal resources of poor countries over the past year, and the I.M.F. projected this week that faster access to vaccinations for high-risk populations could save 500,000 lives in the next six months.The new allocation of so-called Special Drawing Rights would be the largest such expansion of currency reserves in the I.M.F.’s history. If approved by the group’s board of governors, as is expected, the reserves could become available by the end of next month.“This is a shot in the arm for the world,” Kristalina Georgieva, managing director of the I.M.F., said in a statement. “The S.D.R. allocation will help every I.M.F. member country — particularly vulnerable countries — and strengthen their response to the Covid-19 crisis.”Ms. Georgieva made the announcement as finance ministers and central bank governors of the Group of 20 nations were gathering in Venice to discuss international tax policy, climate change and the global economic response to the pandemic. The I.M.F., established in 1944 to try to broker economic cooperation, has warned of a two-track economic recovery, with poor countries being left behind while advanced economies experience rapid expansions.Ahead of the meetings, Treasury Department officials said expanding access to vaccines would be a central topic of discussion. It is also a potentially contentious one, as some developing countries have suggested that advanced economies are not doing enough to ensure fair distribution of vaccines.“The immediate priority for developing countries is widespread access to vaccines that match their deployment programs,” David Malpass, president of the World Bank, said in a speech in Venice on Friday.Mr. Malpass called on G20 countries to share doses and remove all trade barriers to exporting finished vaccines and their components. He noted that the pandemic had aggravated structural weaknesses that had dogged developing countries for years.“Even as that is accomplished,” Mr. Malpass said of expanded vaccine distribution, “development faces years of setback and struggle.”Narrowing the gap between the fortunes of advanced and developing economies was a central topic on the first day of the G20 meetings in Venice. Bruno Le Maire, France’s finance minister, told reporters on Friday that inequality was a risk to the stability and security of Europe that could lead to an influx of refugees. He argued that it must be urgently addressed.It remains to be seen how far the $650 billion will go to help developing countries as they race to vaccinate people before new variants of the virus take hold, including the Delta variant, which has plunged many countries back into a health crisis.The United Nations Conference on Trade and Development called this year for $1 trillion worth of Special Drawing Rights to be made available by the I.M.F. as a “helicopter money drop for those being left behind.”Jubilee USA Network, a nonprofit organization that advocates debt relief for poor countries, praised the move by the I.M.F. and called on wealthy countries to do more to help.“This is the biggest creation of emergency reserve funds that we’ve ever seen, and developing countries will immediately receive more than $200 billion,” said Eric LeCompte, executive director of Jubilee USA Network. “Wealthy countries who receive emergency reserves they don’t need should transfer those resources to developing countries struggling through the pandemic.”The I.M.F., the World Bank, the World Health Organization and the World Trade Organization have created a new vaccine task force and called for an additional $50 billion investment to broaden access to supplies. The groups have also called on G20 countries to set a goal of having 40 percent of their populations vaccinated by the end of this year and 60 percent by the middle of next year.The United States has thrown its support behind the expansion of the I.M.F. reserves, reversing a Trump administration policy and angering Republican lawmakers in the process.The Trump administration balked at the proposal last year and prevented it from moving forward. It argued at the time that boosting the emergency reserves was an inefficient way to provide aid to poor countries and that doing so would provide more resources to advanced economies that did not need the help, like China and Russia.Republican lawmakers have since accused the Biden administration of bolstering the fortunes of adversaries, while doing little to actually help developing nations. Although Republicans have introduced legislation that would put restrictions on how the I.M.F. reserves were used if they were authorized, such proposals are unlikely to pass with Democrats in control of Congress.Under Treasury Secretary Janet L. Yellen, the United States has taken a different view from the Trump administration, and the United States supports the allocation. Ms. Yellen believes that rich countries will have little use for the S.D.R.s but that developing economies will be able to use them to get enough money to vaccinate their people.Treasury Secretary Janet Yellen, center, arriving for the Group of 20 finance ministers and central bank governors meeting in Venice on Friday.Andrea Merola/EPA, via ShutterstockSpecial Drawing Rights work by allowing member countries of the I.M.F. to cash the asset in for hard currency. Their value is based on a basket of international currencies and is reset every five years.Each of the 190 countries that is a member of the I.M.F. gets an allotment of S.D.R.s based on its shares in the fund, which tracks with the size of a country’s economy. The new reserves would also be distributed under this formula, with the largest economic powers like the United States gaining the biggest tranche.The drawing rights cannot be used to buy things on their own, but they can be traded for currencies that can. If two countries agree, they can trade their Special Drawing Rights for cash, with the I.M.F. acting as a middleman to facilitate the trade.That has prompted some criticism that the program will not work unless rich countries voluntarily transfer their holdings to poorer nations.“It is a legitimate concern that new S.D.R.s will end up mostly in the hands of large and rich countries that have little use for them rather than in the hands of the smaller and poorer countries that really need them,” said Eswar Prasad, the International Monetary Fund’s former China chief. “A reallocation of S.D.R.s toward the latter group, in addition to increasing the overall volume of S.D.R.s, would be helpful in dealing with stresses to the global financial system.”To address some of those concerns, the I.M.F. is working to develop a new trust fund where rich countries can channel their excess S.D.R.s. The goal is to create a $100 billion pot of money that poor countries take loans from so they can expand health care systems or address climate change in conjunction with existing I.M.F. programs.The United States has previously indicated it will make available about one-fifth of its allocation, worth about $20 billion. At the urging of the United States, the I.M.F. is also working to create greater transparency around how the assets are being used so that it is clear that American adversaries are not benefiting from the proceeds.The I.M.F.’s board of governors is expected to hold its vote in early August. More

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    As U.S. Prospects Brighten, Fed’s Powell Sees Risk in Global Vaccination Pace

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    Some countries are lagging behind in vaccinations, and policymakers warned that no economy is secure until the world is safe from coronavirus variants.Jerome H. Powell, the Federal Reserve chair, and the managing director of the International Monetary Fund, Kristalina Georgieva, emphasized the economic need for worldwide vaccinations on Thursday.Pool photo by Stefani ReynoldsJerome H. Powell, the Federal Reserve chair, stressed on Thursday that even as economic prospects look brighter in the United States, getting the world vaccinated and controlling the coronavirus pandemic remain critical to the global outlook.“Viruses are no respecters of borders,” Mr. Powell said while speaking on an International Monetary Fund panel. “Until the world, really, is vaccinated, we’re all going to be at risk of new mutations and we won’t be able to really resume activity with confidence all around the world.”While some advanced economies, including the United States, are moving quickly toward widespread vaccination, many emerging market countries lag far behind: Some have administered as little as one dose per 1,000 residents.Mr. Powell joined a chorus of global policy officials in emphasizing how important it is that all nations — not just the richest ones — are able to widely protect against the coronavirus. Kristalina Georgieva, the managing director of the International Monetary Fund, said policymakers needed to remain focused on public health as the key policy priority.“This year, next year, vaccine policy is economic policy,” Ms. Georgieva said, speaking on the same panel as Mr. Powell. “It is even higher priority than the traditional tools of fiscal and monetary policy. Why? Without it we cannot turn the fate of the world economy around.”Still, she also warned against pulling back on monetary policy support prematurely, saying that clear communication from the United States is helpful and important. The Fed is arguably the world’s most critical central bank thanks to the widely used dollar, and unexpected policy changes in the United States can roil global markets and make it harder for less developed economies to recover.“Premature withdrawal of support can cut the recovery short,” she cautioned.The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds per month, policies meant to stoke spending by keeping borrowing cheap. Officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.“There are a number of factors that are coming together to support a brighter outlook for the U.S. economy,” Mr. Powell said, noting that tens of millions of Americans are now fully vaccinated, so the economy should be able to fully reopen fairly soon. “The recovery though, here, remains uneven and incomplete.”Employers added more than 900,000 workers to payrolls last month, but the country is still missing millions of jobs compared with February 2020 and fresh data showed that state jobless claims climbed last week. Mr. Powell pointed out that the burden is falling heavily on those least able to bear it: Lower-income service workers, who are heavily minorities and women, have been hit hard by the job losses.When asked what keeps him awake at night, Mr. Powell said that “there’s a pretty substantial tent city” he drives past on his way home from work in Washington. “We just need to keep reminding ourselves that even though some parts of the economy are just doing great, there’s a very large group of people who are not.”Given the pandemic’s role in exacerbating inequality, both Mr. Powell and Ms. Georgieva said it was critical to support workers and make sure they can find their way into new and fitting jobs.The Fed chair said policy tended to focus too much on short-term, palliative measures and not enough on longer-term solutions that help to expand economic possibility.“I think we need to, really as a country — and I’m not talking about any particular bill — invest in things that will increase the inclusiveness of the economy and the longer-term potential of it,” Mr. Powell said. “Particularly invest in people, so that they can take part in, contribute to and benefit from the prosperity of our economy.”Those comments come as the Biden administration is pushing for an ambitious $2 trillion infrastructure package that would include provisions for labor market training, technological research and widespread broadband. The administration has proposed paying for the package by raising corporate taxes.“For quite some time, we have been in favor of more investment in infrastructure. It helps to boost productivity here in the United States,” Ms. Georgieva said, calling climate-focused and “social infrastructure” provisions positive. She said they had not had a chance to fully assess the plan, but “broadly speaking, yes, we do support it.”But the White House’s plan has already run into resistance from Republicans and some moderate Democrats, who are wary of raising taxes or engaging in another big spending package after several large stimulus bills.Some commentators have warned that besides expanding the nation’s debt load, the government’s virus spending — particularly the recent $1.9 trillion stimulus package — could cause the economy to overheat. Fed officials have been less worried. “There’s a difference between essentially a one-time increase in prices and persistent inflation,” Mr. Powell said on Thursday. “The nature of a bottleneck is that it will be resolved.”If price gains and inflation expectations moved up “materially,” he said, the Fed would react.“We don’t think that’s the most likely outcome,” he said. More