The U.S. Federal Reserve is committed to using full range of tools to support the economy until the recovery from the COVID-19 pandemic is "well and truly done," a senior Fed official said on Thursday.
"While our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so as the recovery progresses, it will take some time for economic activity and employment to return to levels that prevailed at the business cycle peak reached last February," Fed Vice Chair Richard Clarida said in remarks to the 2021 Institute of International Finance Washington Policy Summit via webcast.
"We are committed to using our full range of tools to support the economy until the job is well and truly done to help ensure that the economic recovery will be as robust and rapid as possible," he said.
Clarida noted that the true U.S. unemployment rate is closer to 10 percent and employment is still 9.5 million below its pre-pandemic level for the economy as a whole.
The Fed official also said that 12-month measures of inflation are expected to move above the central bank's target of 2 percent over the next few months due to transitory factors.
"I expect most of this increase to be transitory and for inflation to return to-or perhaps run somewhat above-our 2 percent longer-run goal in 2022 and 2023," he said, adding this outcome would be "entirely consistent" with the new framework the Fed adopted in August 2020.
Clarida's remarks came after Fed governor Lael Brainard on Tuesday called for a patient policy approach based on outcomes to achieve the central bank's inflation and employment goals.
"By taking a patient approach based on outcomes rather than a preemptive approach based on the outlook, policy will be more effective in achieving broad-based and inclusive maximum employment and inflation that averages 2 percent over time," she said.
The Fed last week kept its benchmark interest rate unchanged at the record-low level of near zero, as inflation debate heats up, driven by COVID-19 vaccination progress and the latest relief package. Most Fed officials expect interest rates to remain near zero at least through 2023.