Lael Brainard: Remaining steady as the economy reopens

Remarks (via webcast) by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at the Economic Club of New York, New York City, New York, 1 June 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

It is a pleasure to join the Economic Club of New York for this discussion. Consumer demand is strong, vaccine coverage is expanding, and pandemic-affected sectors are reopening in fits and starts. As was the pandemic shutdown with its ebbs and flows, the reopening is without precedent, and it is generating supply–demand mismatches at the sectoral level that are temporary in nature. Separating signal from noise in the high-frequency data may be challenging for a stretch. The supply–demand mismatches at the sectoral level are making it difficult to precisely assess inflationary developments and the amount of resource slack from month to month.

Looking through the noise, I expect we will see further progress in coming months, but the economy is far from our goals, and there are risks on both sides. The best way to achieve our maximum-employment and average-inflation goals is to be steady and transparent in our outcome-based approach to monetary policy while remaining attentive to the evolution of the data and prepared to adjust as needed.

Pent-Up Demand and Supply Constraints

Last week's updated estimate of first-quarter real gross domestic product continued to show strong annualized growth of 6.4 percent. I expect a further acceleration in output growth driven by consumer demand during the current quarter as the reopening of the economy broadens.