UPDATE 1-Fed's George: Fiscal policy will remain important until pandemic is over
(Adds discussion of inflation)
WASHINGTON, Feb 16 (Reuters) – Fiscal policy will remain an important economic prop in the United States until the pandemic subsides, Kansas City Federal Reserve President Esther George said on Tuesday, with inflation unlikely to pose a near-term problem even with record levels of public debt.
George did not comment specifically about the $1.9 trillion spending plan the Biden administration is hoping to push through Congress, but in comments to a real estate symposium she noted how government programs last year kept the economy afloat through the first months of the pandemic.
It is still needed, she said in comments to a symposium organized by the University of Missouri-Kansas City.
“Until we get to the point where the virus is in the rearview mirror (fiscal policy) is likely to remain important to economic activity,” George said. “The economy needs a bridge.”
Once the pandemic eases and consumers can spend freely again, George said the economy may face “price pressures.”
But “in the near term I don’t see we are going to have an inflation problem,” said George, who in recent years has been among the more concerned at the Fed about inflation and financial stability risks.
Even if some industries or products see price hikes, driven by demand for example for food cooked at home, she said the aggregate price changes the Fed watches are also offset by declines, for example, in transportation prices.
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