February 19, 2021 | 11:39
Federal Reserve Monetary Policy Report (February 19, 2021)
The semi-annual Monetary Policy Report stuck to the main themes of late from Chair Powell and nearly every other policymaker: the economy is recovering but remains at risk due to the unpredictable pandemic; the labour market is making headway but has a long way to reach full employment; and inflation is unlikely to return to the 2% target on a sustained basis until 2023. There was no hint of a big upgrade to its economic forecast. In December, the median FOMC member expected real GDP to rise 4.2% in 2021 on a Q4/Q4 basis--we are now a full two percentage points above this call.
A revised economic forecast would be something to watch out for in the Chair's congressional testimony on Tuesday and Wednesday. Given the blowout January retail sales report and potential hefty fiscal stimulus winding its way through the reconciliation process, some upgrade is likely. Still, Powell could well stick to his glass-is-half-empty tone, and continue to express no urgency to step off the gas pedal. He recently downplayed the risk of QE tapering this year, given that the Fed is unlikely to achieve its employment, income and inflation goals for "some time".