Fed President: The US will pull the global economy back

The US will make other developed economies “smoke” in 2021 with the highest growth rate in decades, according to the US Federal Reserve (Fed).

Fed headquarters in Washington, DC Photo: AFP

Regardless, the Chairman Fed Jerome Powell remains It is highly likely that a strong US recovery from the Covid-19 pandemic will help “at the starting line” of economies find their foothold, such as Europe.

“Need America is A very strong increase, when the US economy gets better, will also support global operations, “said Powell in a press conference on March 17 after the latest Fed policy meeting.

“When the US economy strengthens, that strength tends to support global economic activity,” the Fed Chairman added.

Mr Powell made the comment when asked about the distinctly different growth prospects for the major recent economies, especially among the US, where the Covid-19 vaccine program is rapidly underway. rapid and federal bailouts in the past few months have reached nearly $ 3 trillion, and Europe – where the Covid-19 vaccine program is slowing down and bailout packages approved months ago remain in limbo.

Fed policy makers on March 17 forecast the US economy to grow 6.5% in 2021 – the highest level since the 1980s. , 3 percentage points compared with the agency’s forecast as of December 2020. If correct as the Fed’s forecast, the US economy will achieve a staggering 10 percentage point growth compared to the 3.5% decline in 2020.

By contrast, the President of the European Central Bank (ECB), Christine Lagarde, Powell’s transatlantic counterpart, said that the eurozone economy could decline in the first quarter of 2021. ECB staff forecasts growth in this region will reach 4% by 2021.

“I am not concerned about the short term – I mean I want to see Europe growing faster, I want to see the Covid-19 vaccine deployment more smoothly – and I don’t worry too much about us. in the future because we are on a very good track, there is going to be very strong financial support, now the vaccination process is happening rapidly and the cases are declining, “said Powell. strong.

“I think we are in a good position,” said the Fed chairman.

This year’s US economic growth forecast is not only far behind Europe, but a Reuters poll in February estimated that the Japanese economy will also decline in the first quarter of 2021 and the growth of fiscal year 2021 will only at 3.6%.

The strong increase in US demand is expected to positively support an export-dependent economy like Japan. A welcome development by the Bank of Japan is that it is reviewing interest rates during its two-day policy meeting ending tomorrow March 19.

Markets are focused on watching whether the Central Bank of Japan’s upcoming policy moves are sustainable enough to weather the protracted battle with inflation and see how Governor Haruhiko Kuroda will judge on the outlook. Fragile recovery of this economy.

“The strength of the US economy is very clear. That means Japan’s economy will be recovered thanks to a solid recovery of external demand,” said Mari Iwashita, chief economist at the company. Securities Daiwa (Japan) said.

“But external demand alone will not push inflation (Japan) up, inflation will continue to decline unless consumption increases,” added Ms. Mari Iwashita.

In the past, differences in growth forecast and monetary policy among major central banks in the world sometimes caused market turbulence. Not only stocks, but also the bond and currency markets, follow the Fed’s decision.

“We went through various rebounds, just like we did after the most recent crisis. In one case, as in another, the US recovery is leading to a full recovery. demand, “said Mr Powell.