A full US economic recovery "will take time to complete," a top Federal Reserve official said Monday, adding that effects from the far-reaching Delta variant of Covid-19 have surfaced in recent data.
"The recovery continues to show solid momentum," John Williams, president of the Federal Reserve Bank of New York, said in a speech at the New York Economic Club.
But "the direct and indirect effects of the virus continue to shape the way we live our lives," Williams said, adding that the latest Covid resurgence "is affecting consumer spending and jobs."
Fed chair Jerome Powell once again stressed that the recovery depends largely on the course of the virus.
"The Delta variant has led to a surge in cases, causing significant human suffering and slowing the economic recovery. Continued progress on vaccinations would help support a return to more normal economic conditions," Powell said in testimony prepared for delivery Tuesday.
Powell is due to appear with Treasury Secretary Janet Yellen before the Senate Banking Committee on Tuesday to discuss the impact of the massive federal government stimulus spending.
The central bank "took broad and forceful measures" to support the economy, with a series of credit facilities that unlocked more than $2 trillion in funding, the Fed chief explained.
"Those facilities provided essential support through a very difficult year," Powell said, but most have now been closed.
- Watching inflation -
Williams and Powell, along with Fed board member Lael Brainard in separate events, all acknowledged the recent spike in prices but again attributed it largely to pandemic-related factors that will fade over time.
In an appearance before the National Association for Business Economics, Brainard said there are "good reasons" to expect inflation pressures to moderate.
The Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index, rose at a rapid 4.2 percent pace in July, far above its two percent goal.
But Brainard said, "While inflation has been well above target for the past six months, affecting consumers and businesses alike, it previously spent roughly a quarter-century below 2 percent."
While the constraints, including bottlenecks and hiring difficulties, could "prove to be greater and more enduring than anticipated," Powell said the Fed has the tools to keep the rate around the two percent goal.
Williams also said the labor market still has "a long way to go" to reach the Fed's goal of maximum employment, noting that there are more than five million fewer jobs today than before the pandemic.
Williams, a voter on the policy-setting Federal Open Markets Committee, indicated that the Fed's massive bond buying program could soon be scaled back, echoing the central bank's comments from last week.
But though a "moderation in the pace of asset purchases may soon be warranted," the Fed's overall monetary policy "will continue to support a strong and full economic recovery," he said.