The US economy is likely to expand by seven percent this year as it bounces back from the Covid-19 pandemic, its fastest rate since the early 1980s, a top Federal Reserve official said on Monday.
"This is welcome progress after the toughest period for the economy in living memory and a winter when the pandemic was particularly severe, and the economy suffered as a result," New York Fed President John Williams said in a speech.
He warned against the tendency to "overreact" to price spikes caused by the unique circumstances of the recovering economy this year, while predicting inflation would return to the central bank's two percent target in 2022.
"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 interest rates near zero, with having "positive effects" on the economy, enabling Americans to purchase homes and big-ticket goods.
"In fact, with accommodative financial conditions, strong fiscal 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.
Williams 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."
Rising energy prices and the recovery 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.
He projected inflation will fall "once the price reversals and short-run imbalances from the economy reopening have played out."
Meanwhile, conditions so far are not enough for the Fed to alter policy, he said, echoing the decision of the central bank's policy-setting Federal Open Markets Committee last week.