With the benefit of a successful vaccination program and an almost unprecedented combination of both fiscal and monetary stimulus, we expect GDP growth to be as strong as 6.5% this year and 4.0% in 2022. As the remaining output gap is quickly eliminated, we expect inflation to surprise on the upside, averaging 2.5% over the coming years. With the Fed focused on its new broad-based and inclusive employment goal, we expect it will accommodate higher inflation and be slow to raise interest rates in response. The Biden administration is seeking to add $2trn or more in infrastructure spending later this year, but that won’t make a big difference to the immediate economic outlook because we expect it will be mostly offset by higher taxes.
21 April, 2021
in US Economics › US Fed Watch
Newfound optimism unlikely to change dovish stance
