Fed's Powell hopeful US economy can return to 'more normal conditions' later in 2021
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Encouraging trends are lifting hopes that the US can make strides toward pre-pandemic normalcy later this year,
Data suggests the US is clearing the deadliest wave of the pandemic yet. Daily case counts are the lowest since October and hospitalizations have more than halved from their early January highs. The country's rate of vaccination, while down from its peak, remains well above the Biden administration's 1-million-doses-per-day target.
The falling cases and vaccine distribution "offer hope for a return to more normal conditions later this year," Powell said while testifying to thePowell passively urged more stimulus throughout 2020 but pulled back on such comments after Trump's $900 billion plan passed. Democrats are now set to approve another plan currently worth $1.9 trillion as early as mid-March. While the Fed chief has avoided directly commenting on Biden's aid proposal, he noted during the Tuesday hearing that additional aid isn't likely to spur an immediate concerning jump in inflation.
The change in market expectations has prompted some discussion around when the central bank will taper its asset purchases. The Fed continues to buy $120 billion of assets each month, split between $80 billion in Treasurys and $40 billion in mortgage-backed securities.
Pulling back from the purchase schedule risks jolting financialThe path forward is "highly uncertain," and the recovery "remains uneven and far from complete," Powell added. While the manufacturing and housing sectors fared well in recent months, spending in some service industries remains low and the labor market's recovery has stagnated.
Fiscal stimulus has helped pad against some of the pandemic's fallout, but the path of the virus is the single biggest factor in bringing about a swift recovery, Powell said.
"While we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year," the Fed chair said. "In the meantime, we should continue to follow the advice of health experts to observe social-distancing measures and wear masks."Copyright © 2021. Times Internet Limited. All rights reserved.For reprint rights. Times Syndication Service.
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