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FOMC minutes reveal potential for boost in economic activity
According to NAFCU's Curt Long, minutes from the Federal Open Market Committee's (FOMC) January videoconference meeting suggest the committee viewed the stimulus provided by the passage of the Consolidated Appropriations Act (CAA) in December, combined with the likelihood of additional fiscal support and the anticipated continued progress in vaccinations, as factors pointing toward a sizable boost in economic activity.
"The minutes from the FOMC’s January meeting indicate that while fiscal measures and supply constraints could lead to isolated price increases in some sectors, committee members are predisposed to view those as temporary," said Long, NAFCU's chief economist and vice president of research. "Until there is a sustained rise in inflation, the Fed is unlikely to raise rates.”
A number of participants suggested that there could be increases in the prices of some goods – where production has been subject to supply chain constraints or soon could be. In addition, several other participants anticipated that a possibly abrupt return to normal levels of activity could result in one-time increases in certain goods prices. In response, many participants noted that changes in relative prices could temporarily raise measured inflation but would not have a lasting effect.
Regarding economic activity and employment, participants judged that the pace of recovery had moderated in recent months and noted weaknesses concentrated in the sectors of the economy most adversely affected by the resurgence of the coronavirus.
Other key findings from the minutes released Wednesday include:
- participants observed that the resurgence in COVID-19 infections and associated social-distancing measures were restraining activity in some sectors, particularly in industries such as travel and leisure and hospitality; and
- many participants stated that their business contacts were optimistic that continued progress on vaccinations coupled with further fiscal support would also result in more improvement in overall business conditions.
The FOMC is expected to next meet March 16-17.