U.S. economy’s rebound sets up test of Fed’s new pledge

The strong US economy’s rebound from the COVID-19 lows may set one early test for a new pledge of Federal Reserve to keep the rates of interest close to 0 and its risen tolerance towards inflation.

Interviews and surveys carried out by the 12 regional financial institutes of the Federal Reserve last month and previously this month reveal the US economy recovering at modest pace, with consumers buying homes as well as spending more.

The US economy, indeed, grew by over 30 per cent on one yearly basis previous quarter, say the economists, thus making up for majority of 31.4 per cent fall during Q2.

The rise has been further fueled by one relief package worth $2.3 trillion as well as trillions more infused by the Federal Reserve in the financial markets.

The traditional ideas related to inflation would indicate that this really is a time where one might see some sort of inflation, said James Bullard, President, St. Louis Fed. He said that the rise in government spending for combating the coronavirus as well as the bottlenecks in the economy which isn’t designed for growing fast are setting stage for an increase in prices.

With daily coronavirus deaths declining and businesses adapting to ‘new normal,’ he said that the US economy growth would probably be on the rise for some time now.

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