The U.S. economy is likely to expand by seven percent this year as it bounces back from the Covid-19 pandemic, the fastest rate since the early 1980s, a top Federal Reserve official said on Monday.
“This is welcome progress after the toughest period for the economy in memory and a winter when the pandemic was particularly severe and the economy was hit as a result,” New York Fed President John Williams said in a speech.
He warned of the tendency to “overreact” to price increases caused by the unique circumstances of that recovery economy this year, while predicting that inflation would return to the central bank’s 2% target by 2022.
“While I am optimistic that the economy is now moving in the right direction, we still have a long way to go to achieve a robust and complete economic recovery,” Williams said in a speech that will be delivered to Women in Housing and Finance annually. . Stronger employment growth is needed to complete returns.
He credited the Fed’s stimulating policies, including near-zero interest rates, with “positive effects” on the economy, enabling Americans to buy homes and goods with big tickets.
“In fact, with favorable economic conditions, strong fiscal support and extensive vaccinations, I expect the economic growth rate this year to be the fastest we have experienced since the early 1980s,” he said.
Williams said he expects “real GDP to grow by about seven percent this year” and calls it “welcome progress after the toughest period for the economy in memory.”
Rising energy prices and the recovery from the decline in the pandemic are driving prices higher, but “it is important not to overreact to this price volatility due to the unique circumstances of the pandemic,” Williams said.
He estimated that inflation would fall “when price fluctuations and short-term imbalances from the reopening of the economy have played out.”
Meanwhile, conditions so far are not enough for the Fed to change policy, he said, thanking the decision of the central bank’s decision-making Federal Open Markets Committee last week.