The US Federal Reserve said the widening vaccination programme against Covid helped the US economy stage a robust rebound, while pledging that monetary policy will continue to provide "powerful support".
"Progress on vaccinations has led to a reopening of the economy and strong economic growth, supported by accommodative monetary and fiscal policy," the central bank said on Friday in its twice-yearly monetary policy report to Congress. "However, the effects of the Covid-19 pandemic have continued to weigh on the US economy, and employment has remained well below pre-pandemic levels."
The Fed report, which provides lawmakers with an update on economic and financial developments and monetary policy, was published ahead of chair Jerome Powell's testimony before the house financial services committee on Wednesday and the senate banking panel a day later.
Fed officials held interest rates near zero at their meeting last month and pledged to maintain asset purchases at a $120bn (about R1.7-trillion) monthly pace until "substantial further progress" had been made on employment and inflation.
A record of the June 15-16 gathering released on Wednesday showed they expected progress to continue but were not yet ready to lay out a timeline to scale back buying, citing uncertainty over the outlook.
The monetary policy report noted that Fed asset purchases and a pledge not to raise interest rates until it had achieved its inflation and employment goals "will help ensure that monetary policy continues to deliver powerful support to the economy until the recovery is complete".
The Fed's report said the pandemic may have sped up structural changes already taking place in the labour market, such as increased adoption of technology and the pace of retirements, leading to a post-pandemic employment reality that may look different from early 2020, before the onset of the virus.
The labour force participation rate has recovered somewhat over the past few months, but has done so less consistently than the unemployment rate.
Many people remain out of the labour market due to virus fears and to care for children whose schooling is still virtual.
The impact of expanded employment insurance, which some economists and businesses have argued are incentivising workers to remain out of the labour force, remains unclear, the Fed said.
– Bloomberg News. For more articles like this please visit Bloomberg.com.
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