“The recovery here remains uneven and incomplete,” Powell told a virtual panel Thursday during the Spring meetings of the International Monetary Fund. The world won’t be able to fully resume economic activity until the virus is controlled everywhere, he said. The Fed chair urged people to get vaccinated and continue social distancing as further outbreaks would slow down the recovery, even if they might have less economic impact than at the start of the pandemic.
“This year, next year, vaccine policy is economic policy,” IMF Managing Director Kristalina Georgieva said on the panel. “And it is even a higher priority than the traditional tools of fiscal and monetary policy.”
Fed officials have repeatedly stressed that the U.S. economy continues to need aggressive monetary policy support as it recovers from the pandemic, even as the outlook brightens amid widening vaccinations.
Minutes of their March meeting released Wednesday said policy makers expect it will likely be “some time until substantial further progress” is made on employment and inflation. That refers to the tests they’ve set for scaling back bond purchases of $120 billion a month. Responding to a question about inflation and what would trigger Fed action, Powell said: “We would be monitoring inflation expectations very carefully. If we see them moving persistently and materially above levels we’re comfortable with, then we’d react to that.” The Fed’s latest forecasts show officials don’t expect to raise interest rates from near zero before the end of 2023, even as they sharply upgraded projections for growth and employment this year.