April 8 (Reuters) - The U.S. Federal Reserve plans to keep
its super-easy policy in place even as data shows the economy
kicking into higher gear, with policymakers predicting on
Thursday that an expected increase in prices this year will fade
on its own, and warning about the recent uptick in COVID-19
"Cases are moving back up here, so I would just urge that
people do get vaccinated and continue socially distancing," Fed
Chair Jerome Powell, who has had his shots, said at an economic
forum during virtual International Monetary Fund and World Bank
meetings. "We don't want to get another outbreak; even if it
might have less economic damage and kill fewer people, it'll
slow down the recovery."
Speaking at a separate event, St. Louis Federal Reserve Bank
President James Bullard said the Fed should not even discuss
changes in monetary policy until it is clear the pandemic is
over, tying future Fed discussions tightly to the success of the
The Fed has said it will keep buying $120 billion in bonds a
month until it sees "substantial further progress" toward
meeting the central bank's employment and inflation goals.
Bullard said he regards that as contingent on beating the
coronavirus. "We have to get the pandemic behind us first," he
said. "There are still risks, and things could go in a different
The Fed has long said the virus, which touched off the
sharpest downturn in decades just over a year ago, will
determine the course of the recovery.
Some 3 million Americans are getting vaccinated every day,
and a majority of older Americans at highest risk of dying from
COVID-10 have been fully vaccinated.
That, along with last month's $1.9 trillion pandemic relief
package and the Fed's near-zero interest rates, sets the economy
up for what Fed officials expect to be the fastest growth in 40
years this year.
But new variants of the virus are driving surges in
caseloads in swaths of the Midwest and Northeast particularly.
Minneapolis Fed President Neel Kashkari told the Economic
Club of New York in yet another virtual event on Thursday that
those variants, and the school and daycare center closures they
could force, are the "biggest risks" to the U.S. recovery.
Meanwhile, much of the world has barely begun mass
vaccinations, posing what policymakers said was another risk.
Fed policymakers do expect a surge in spending in coming
months, along with bottlenecks in supply, to push prices higher
They say that's unlikely to turn into the kind of upward
spiral in prices that would constitute worrisome inflation and
require the Fed to respond with rate hikes.
"We think there will be upward pressure on prices which may
be passed along to consumers in the form of price increases - we
think that that will be temporary," Powell said, noting that
inflation has been low for 25 years, feeding into a psychology
of low inflation expectations.
And despite a government report last week showing U.S.
employers added nearly a million jobs last month, there are
still nearly 9 million fewer employed people in the American
economy than there were before the pandemic.
Powell said he would want to see "a string of months like
that so we can really begin to show progress toward our goals."
The unevenness of the recovery, too, is a serious issue,
Powell said, with minorities, women and workers in sectors like
leisure and hospitality faring worse than others.
Fed policymakers boosted their forecasts for growth,
inflation and employment this year, but Powell noted that would
not necessarily feed into any policy change.
To judge whether it was time to reduce asset purchases,
Powell said, "we are not really looking at forecasts for this
purpose, we are looking at actual progress" on inflation and
(Reporting by Ann Saphir with reporting by Dan Burns and David
Editing by Chizu Nomiyama and Jonathan Oatis)