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Fed Issues Economic Assessment And Forecast For 2021

AILSA CHANG, HOST:

As sometimes thousands of people lose their lives to COVID-19 each day, thousands are also losing their livelihoods. The COVID economy was the focus of the Federal Reserve's two-day policy meeting, which wrapped this afternoon. As usual, the central bank promised to use all of its tools to support a pandemic-scarred U.S. economy. Meanwhile, people have begun rolling up their sleeves to get vaccinated, offering the promise of widespread protection as soon as sometime next year. NPR's Scott Horsley joins us now.

Hey, Scott.

SCOTT HORSLEY, BYLINE: Good afternoon, Ailsa.

CHANG: Good afternoon. Well, all right. Let's start with the current moment. What did the Fed have to say about the economic situation right now?

HORSLEY: It has certainly improved from where it was last spring, but the pace of improvement has been slowing. And it does look like we're in for a cold winter as the pandemic rages on. You know, more than 3,000 people died from COVID just yesterday. And Federal Reserve Chairman Jerome Powell said he and his colleagues were somewhat surprised earlier this year at how resilient the economy was to infections.

But this latest wave is the worst yet. You know, local governments have been imposing new crackdowns on businesses. Nervous customers are just staying away. You saw that in this morning's retail data, which showed retail sales dropped in November, especially at places like bars and restaurants.

CHANG: Yeah. Well, I guess the next logical question is, what did the Fed have to say about the outlook for the future then?

HORSLEY: Well, as bad as things are right now, those first shots are being administered. And that protection will eventually make its way through the economic bloodstream. Powell says that does offer some hope for a brighter spring or summer.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: Sometime in the middle of next year, you will see people feeling comfortable going out and engaging in a broader range of activities. And my expectation - and I think many people have the expectation - that the second half of next year we should be getting people back to work, we should - businesses should be reopening and that kind of thing. The issue is more the next four or five months, getting through the next four, five, six months.

HORSLEY: The Federal Reserve did issue new projections this afternoon, which were substantially more optimistic than what they were forecasting three months ago when the vaccine was just a hope. Now, it's a reality. The Fed expects the economy to grow next year by 4% and unemployment to decline to 5 1/2%, though Powell does say it's going to take some more time to get back close to full employment, where we were before the pandemic. And most Fed members expect interest rates to stay near zero through 2023.

CHANG: Well, how confident is the Fed about those projections?

HORSLEY: You know, there's just a lot of uncertainty. This kind of vaccine rollout, this mass public health operation, is really without precedent. And so there's not a lot of history to draw on. And there was marginally less uncertainty in the Fed's forecast than there were three months ago, some expectation that the picture is kind of coming into focus. But it's still really muddled by this tug of war between the dire rate of hospitalization and death that we're seeing right now and the prospect of relief in a syringe that could come next year.

CHANG: Yeah. Well, Congress does appear to be getting close to an agreement on a financial relief package, although they are not quite there yet. The Fed chair has been pushing for additional help. What has he been saying about that today?

HORSLEY: Yeah. Powell has really been a cheerleader for fiscal help, although he leaves the details to Congress. He stressed again today there's just a lot of need out there.

(SOUNDBITE OF ARCHIVED RECORDING)

POWELL: It's the 10 million people who lost their jobs. It's people who may lose their homes. We know there's need out there. We know there are small businesses all over the country just hanging on. Now that we can kind of see the light at the end of the tunnel, it would be bad to see people losing their business - their life's work in many cases, or even generations' worth of work - because they couldn't last another few months.

CHANG: Yeah.

HORSLEY: You know, the Fed is doing what it can by keeping interest rates really low, and that's helping things like housing. But people who are out of work, businesses that are locked down, they don't need cheap mortgages, they need cash. And Powell says it's only Congress that can provide that.

CHANG: Indeed. That is NPR's Scott Horsley.

Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.