U.S. gross domestic product could grow 7% in 2021, its fastest pace since the early 1980s, New York Fed Chairman John Williams warned on Monday.
“With accommodating financial conditions, strong budget support and vaccinations, I think this year’s rate of economic growth will be the fastest we’ve seen since the early 1980s,” he said during the interview. ‘a speech by videoconference.
Adjusted for inflation, GDP growth should, according to him, be around 7%.
The gross domestic product recorded in the first quarter an increase of 6.4% on an annualized basis, a measure which allows to project the annual growth if the pace is maintained. However, this should accelerate in the second quarter.
In addition, while some fears persist about a too sharp rise in prices, the president of the New York branch of the Central Bank also deemed “important not to overreact to (the) price volatility resulting from the unique circumstances pandemic ”.
Year-on-year inflation hit 2.3% in March, according to the PCE index, exceeding the US Central Bank’s 2% target. But for John Williams, it is better to “stay focused on the trend” of the price curve.
However, it should not continue to climb for too long as follows: “I expect that once the price reversals (which start to rise again after the drop at the start of the pandemic, Editor’s note) and the Short-term imbalances due to the reopening of the economy will have occurred, inflation will return to around 2% next year, ”he said.
However, he recalled that the economy still has “a long way to go before achieving a complete and solid economic recovery”.
“Let us not forget that there are approximately 8.5 million fewer jobs today than before the pandemic”, he noted.
April employment figures will be released on Friday, and a million job creations are expected.
Fed Chairman Jerome Powell, in a separate intervention Monday, warned of inequalities that have been exacerbated with the pandemic, as even the economic recovery “is slower for [les travailleurs] who occupy the lowest paid jobs ”.
The subject worries the Fed, because “these long-standing disparities […] weigh on the production capacity of our economy. We will only reach our full potential when everyone can contribute and share in the benefits of prosperity ”.
One of the Fed’s goals is to achieve full employment, and, according to Jerome Powell, “Achieving widely shared prosperity requires action by the whole of society, from fiscal and other government policies to industry initiatives. private ”.
The US Central Bank warned last week that, in order to achieve this target of a maximum and inclusive level of employment, and to see inflation stabilize around 2%, it was counting on maintaining its support for the economy.
She reiterated that it was not yet time to think about raising rates or reducing asset purchases.