Vaccines and their distribution to combat the spread of COVID-19 disease have brightened the outlook for the economy this year and beyond, the vice chair of the Federal Reserve said Friday.
In remarks via webcast to the C. Peter McColough Series on International Economics Council on Foreign Relations in New York, Fed Vice Chair Richard Clarida said the “welcome news” on the development of the vaccines to staunch the virus and disease “indicates to me that the prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished.”
Clarida conceded that the recent surge in the disease following the Thanksgiving and Christmas holidays is “cause for concern and a source of downside risk to the very near-term outlook.” But, he said recent data released by the Fed shed light on the path ahead.
“The two new SEP (summary of economic projections) charts that we released for the first time following the December FOMC (Federal Open Market Committee) meeting speak to these issues by providing information on how the risks and uncertainties that surround the modal or baseline projections have evolved over time,” he said. “While nearly all participants continued to judge that the level of uncertainty about the economic outlook remains elevated, fewer participants saw the balance of risks as weighted to the downside than in September.”
He added that, although a little more than half of participants judged risks to be broadly balanced for economic activity, “a similar number continued to see risks weighted to the downside for inflation.”
In any event, Clarida said, it will take some time for economic activity and employment to return to levels prevalent when the financial impact of the coronavirus crisis first became apparent last February. “We are committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible,” he concluded.