Lael Brainard: Patience and progress as the economy reopens and recovers

Remarks (via webcast) by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at "The Road to Recovery and What's Next", a virtual conference sponsored by the Society for Advancing Business Editing and Writing, 11 May 2021.

Central bank speech  | 
12 May 2021

I want to thank Heather Long and the Society for Advancing Business Editing and Writing for inviting me to join you today.

Strong fiscal support and increasing vaccination rates drove a strong rebound in activity in the first quarter, and the second quarter looks to be even stronger. The outlook is bright, but uncertainty remains, and employment and inflation are far from our goals. While more balanced than earlier this year, risks remain from vaccine hesitancy, deadlier variants, and a resurgence of cases in some foreign countries. The latest jobs report is a reminder that the path of reopening and recovery-like the shutdown-is likely to be uneven and difficult to predict, so basing monetary policy on outcomes rather than the outlook will serve us well.

With the renewal of fiscal support, real disposable personal income surged 61 percent on an annualized basis in the first quarter after a decline of 10 percent in the fourth quarter. Real personal consumption expenditures (PCE) jumped 10.7 percent, supporting a robust 6.4 percent growth rate in real gross domestic product (GDP) in the first quarter, despite a large runoff of inventories amid supply chain bottlenecks.

The second quarter appears primed to exceed the strong first quarter as progress on vaccinations continues, and more consumers return to the sectors adversely affected by COVID-19. The combination of fiscal support and depressed discretionary services spending during the shutdown have enabled households to accumulate considerable savings that could continue to fuel spending. Personal savings rose to 21 percent in the first quarter, according to Bureau of Economic Analysis data, on top of the $2.1 trillion increase in household liquid assets reflected at the end of last year.