The economy seems to be gathering steam, though it is still far from fully recovering from the damage wrought by the pandemic, Federal Reserve Chairman Jerome Powell said.
“The recovery has progressed more quickly than generally expected and looks to be strengthening,” Powell said in prepared testimony to be delivered Tuesday to the House Financial Services Committee. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
Powell will be appearing before the committee along with Treasury Secretary Janet Yellen as part of congressional oversight of the government’s response to the pandemic. Both policy makers are slated to testify again on Wednesday, to the Senate Banking Committee.
The Fed chairman praised the actions taken by Congress to support the economy and voiced hopes for a return to more normal conditions in the economy later this year as a greater number of Americans are vaccinated against the virus.
“We welcome this progress, but will not lose sight of the millions of Americans who are still hurting,” Powell said.
In forecasts released last week, Fed policy makers projected that the economy will grow 6.5% in 2021. That would be the fastest pace since 1983 when measured fourth quarter over the same three months a year earlier and would follow a 2.4% contraction in 2020 as a result of the pandemic.
Inflation, as calculated by the personal consumption expenditures price index, is seen in the Fed’s median forecast as ending 2021 at 2.4%. It clocked in at 1.5% in January.
A preponderance of policy makers don’t see the Fed raising interest rates through 2023, according to the projections. Investors, by contrast, are expecting the central bank to increase rates several times by the end of that year, based on trading in the financial markets.
The Fed has also said it will keep short-term interest rates pinned near zero until the labor market has reached maximum employment and inflation has risen to 2% and is on track to moderately exceed that level for some time.