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Despite “very near-term” downside risks to the US economy from the spread of COVID-19 and emergence of new variants, effective vaccines and fiscal relief passed late last year have set the table for stronger growth, Federal Reserve Vice Chair Richard Clarida said on Wednesday.

“Prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished,” Clarida said in remarks prepared for delivery to the US Chamber of Commerce, as reported by Reuters earlier.

Federal Reserve’s Clarida says he is bullish on the US recovery.

Key comments

Says economy has good momentum, vaccine welcome news, and there is a lot of fiscal, monpol support.
Says there is a lot of pent up labor supply in US.
Says not concerned will see an inflation response this year inconsistent with goals.
Says we will not be lifting off on rates until we actually get to 2% inflation, and max employment.
Says later this year inflation will most likely be above 2%, because of base effects.
Says most of that rise will be transitory; expect inflation to be around 2% by end of year.
Says there’s a lot of slack in economy that can meet extra demand from fiscal, monpol support.

Says talk about tapering is premature. 

Says monetary policy accommodation is appropriate for the rest of the year. 

The biggest risk to the economic outlook is the virus. 

Market implications

He is not saying anything here that the Fed’s chair has not already said earlier this week for which had helped US stocks to climb to new record highs on Wednesday. 

 

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