(Bloomberg) -- The U.S. economy still has “a long way to go” to heal from the Covid-19 pandemic and new variants of the virus are troubling, said Federal Reserve Governor Michelle Bowman.
“The prospect of widespread vaccination is definitely encouraging, but there is still a great deal of uncertainty and this is not the time for us to be complacent,” she said Tuesday in response to a question after giving a speech on community banks. “We still see the virus posing risks to the economic outlook.”
Her remarks closely echoed the cautious tone of Chair Jerome Powell in a speech he gave last week in which he urged a national push to return the nation to full employment. The U.S. central bank has signaled it will hold interest rates near zero through at least 2023 to help the economy rebound from the virus, while continuing to purchase Treasuries and mortgage-backed securities at a $120 billion monthly pace until it sees “substantial further progress” on employment and inflation.
“Even with a significant pickup in economic activity in the second half of the year, we still have a long way to go before the economy is back to its full strength,” Bowman said. “While the official unemployment rate that was reported in January was 6.3%, if you add in these millions of people who lost their job or left the labor force, you’d get an unemployment rate that’s really closer to 10%.”
Fed officials have been at pains to stress they will not prematurely withdraw policy support amid an uncertain outlook, and Bowman’s vigilance was echoed later Tuesday by her colleague in charge of the Kansas City Fed.
“The recovery so far has been both incomplete and uneven,” Esther George told a conference on real estate. “As vaccination progresses and the virus is brought under control, we could see a further robust recovery in economic activity, likely by the second half of this year. That said, even as we recover, it seems clear that we are not going back to where we started.”
George, who does not vote on monetary policy this year, also warned that there was a risk of financial instability from commercial real estate if economic support faded before the recovery became sustained.
(Updates with George’s remarks from sixth paragraph)
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