US to grow 7% this year, fastest since1980s: Fed's Williams
However, the world's largest economy still "has a long way to go" and needs several months of solid job growth to reach full recovery, according to John Williams, president of the Federal Reserve Bank of New York.
Williams also backed Fed Chair Jerome Powell's efforts to allay fears that rising prices would lead to an inflationary spiral, and he cautioned against reading too much into short-term results.
He said he expects to see "real GDP increasing around seven percent this year," calling it "welcome progress after the toughest period for the economy in living memory."
"While I am optimistic that the economy is now headed in the right direction, we still have a long way to go to achieve a robust and full economic recovery," Williams said in a speech to be delivered to the Women in Housing and Finance annual conference, noting stronger employment growth would be needed to make the bounceback complete.
He credited the Fed's stimulative policies, including near-zero interest rates, for having a "positive impact" on the economy, allowing Americans to buy homes and large-ticket items.
"In fact, with accommodative financial conditions, strong financial support, and widespread vaccinations, I expect that the rate of economic growth this year will be the fastest that we've experienced since the early 1980s," he said.
Rising energy prices and the rebound from the pandemic downturn are pushing prices higher, but "it's important not to overreact to this volatility in prices resulting from the unique circumstances of the pandemic," Williams said.
Inflation will return to the central bank's two percent target in 2022, he predicted, "after the price reversals and short-run imbalances from the economy's reopening have played out."
Powell made the same argument last week while attempting to assuage investors and some economists' concerns, stating that there is a distinction between "one-time price rises" and a steady rise in inflation.
Powell acknowledged in a speech Monday that the US economic outlook had "clearly brightened," but cautioned that "we're not out of the woods yet."
He emphasized that the economic downturn has mostly harmed lower-income jobs, with Black and Hispanic workers suffering the greatest employment losses.
"The Fed is focused on these long-standing disparities because they weigh on the productive capacity of our economy," Powell said in a speech to a community development group.
"We will only reach our full potential when everyone can contribute to, and share in, the benefits of prosperity."
Williams noted that the economy added 900,000 jobs in March, and said, "I am hopeful that we will see very strong job gains over coming months as the economy continues to reopen."
The Labor Department is scheduled to release the April employment report on Friday, and the median estimate is for the US to add one million jobs.
"But, even with the gains that have occurred, let's not forget that there are about eight and a half million fewer jobs today than before the pandemic," Williams said.
Meanwhile, he said, current conditions are insufficient for the Fed to change policy, repeating the decision of the central bank's policy-setting Federal Open Markets Committee last week.
COVER IMAGE COURTESY OF AHMER KALAM VIA UNSPLASH