George of KC Fed: vaccination delays one of the biggest risks to the US recovery

WASHINGTON (Reuters) – The delay in the rollout of coronavirus vaccines is now among the biggest risks facing the United States, Kansas City Federal Reserve Chairman Esther George said on Tuesday with an economy on the verge of a “recovery” after the vaccination program is successful.

“I’m generally optimistic that the year will be a year of continued recovery,” with consumers willing to spend surplus savings and businesses likely to replenish depleted stocks during the pandemic, George said in a prepared speech at a Kansas City business group.

However, “just two weeks later we are off to a rough start,” she said. “Much of the optimism for a possible recovery this year relates to a successful and widespread vaccination program. One of the biggest risks to the outlook is a significant delay or disruption … It’s hard to imagine a sustainable and robust recovery until the virus interferes with day-to-day decision making.

George spoke on a day when attention turned to the slow initial rollout of the vaccine and took action by the Trump administration, in its final days, to speed up the pace of vaccination.

George’s optimistic view of the economy’s potential, post-pandemic, is widely shared by the Fed, to the point that it has led some policymakers to start discussing when it might be appropriate to put the brakes on action. last year to fight the coronavirus recession.

George said she felt it was “too early to speculate on the timing of any changes” in the Fed’s approach, which includes not only near zero interest rates, but $ 120 billion in ” monthly purchases of government and government-guaranteed securities.

However, she said the upcoming debate over post-pandemic policy was “likely to be difficult” for the Fed, as it attempts, for example, to determine how badly the country’s labor market has been damaged by the pandemic, which industries have changed for good, and how much employment could rebound.

In particular, she said that while she did not see higher inflation as “a short-term threat”, price fluctuations after the pandemic mean headline inflation “could move closer to the inflation target. (from the Fed) faster than some might expect.