FED CHAIR POWELL: AMERICAN RESCUE PLAN WILL HELP BOOST 2021 ECONOMIC GROWTH TO 6.5%, INFLATION NOT A CONCERN
Yesterday, Top Economists Debunked Inflation Fear-Mongers in a Press Call Organized by Invest in America
Today, Federal Reserve Chair Jerome Powell predicted that increased vaccine production and the public investments in the American Rescue Plan will boost economic growth to 6.5% this year, and dismissed concerns that a bout of inflation would damage the economy.
Politico’s Victoria Guida reports:
“The Federal Reserve on Wednesday projected the U.S. economy will grow 6.5 percent this year, the fastest pace in four decades, fueled by growing vaccination rates and nearly $2 trillion in new federal spending.
Fed Chair Jerome Powell has rejected fears that more direct checks to Americans from the federal government will lead to troubling price spikes, doubling down on the Fed’s pledge to keep interest rates low to allow as many people back into the labor force as possible.
Even as Fed officials expect unemployment to drop to 3.5 percent in 2023, they still expect inflation to hover around 2 percent for the next couple of years.”
Yesterday, a group of top economists discussed how the American Rescue Plan will significantly boost GDP and debunked fear-mongering about inflation during a press call hosted by Invest in America:
“Some critics of the American Rescue Plan claim we’ve done too much and they raise the specter of overheating to inflation. I think these concerns are far too overdrawn,” said Josh Bivens, research director for the Economic Policy Institute. “I will start worrying about hypothetical inflation and overheating when inequality in the labor market is reversed. For now, I’m basking in the glow of having learned from the mistakes we made in the past couple of recessions.”
“I am heartened by the historic legislation passed last week and by the administration and the Democrats in Congress stepping in and saying ‘We are not done,’” said Claudia Sahm, former Federal Reserve economist. “I have spent a lot of time in the last month thinking through the inflation risk. Inflation hawks have not learned from the Great Recession. The Democrats have. The risk of overheating is very low, and doing too little and not getting all of us to the finish line would be unconscionable.”
“The American Rescue Plan delivers sorely needed aid to fight the pandemic, support cash-strapped state and local governments, and deliver economic relief to financially struggling families across the nation,” said Mark Paul, assistant professor of economics at New College of Florida and Roosevelt Institute fellow. “A tight labor market and a little bit of inflation would actually be a good thing, particularly given the horrendous inequality crisis we find ourselves in. Running a cold economy leads to lackluster wage growth and the exclusion of millions of Americans from the labor market. Right now, we have a once in a lifetime opportunity to run a persistently hot economy to actually put the American people back to work and help them see sustained wage growth.”