Expert perspective

Why we don’t expect Fed rate hikes anytime soon

March 19, 2021

Questions and Answers

Meet the experts

Adam Schickling's headshot
Making accommodations

Mr. Patterson:

1 According to the Bloomberg COVID-19 Vaccine Tracker, an average of 2.47 million vaccine doses per day were administered in the United States in the week ended March 17.


Mr. Patterson:

2 Good examples of the Fed's public communications on this point are a January 13, 2021, speech on full employment by Fed Governor Lael Brainard, available here, and a January 13, 2021, speech by Fed Vice Chair Richard Clarida on price stability, available here.


Mr. Schickling:

3 Unemployment and labor force participation data are from the U.S. Bureau of Labor Statistics.

How the pandemic has pushed people out of the labor force
The illustration compares the degree to which people left the labor force in 2020 with an average for the eight preceding years, measured by percentage-point changes in the labor participation rate. The change related to retirement was negative 0.77 point in 2020 compared with a negative 0.31 point average for the prior years. Related to family responsibilities, changes were negative 0.38 point in 2020 compared with positive 0.04 point for the prior years. For “not in labor force but want a job,” changes were negative 0.84 point in 2020 compared with positive 0.13 point for the prior years. And the total changes were negative 1.72 points in 2020 compared with negative 0.05 point for the prior years.

Mr. Schickling:

4 NAIRU stands for non-accelerating inflation rate of unemployment.

5 For example, see Fed Chair Jerome Powell's February 10, 2021, speech on the labor market, available here.

Tight labor markets haven’t recently triggered worrisome inflation
The illustration shows that worrisome core inflation hasn’t accompanied tight labor markets in the last quarter-century, whereas it routinely did in the preceding few decades.

Mr. Patterson:


Mr. Patterson:


Mr. Patterson:

6 This figure measuring the 2020 U.S. change in real GDP is from the U.S. Bureau of Economic Analysis, second estimate, February 25, 2021.

7 A basis point is one-hundredth of a percentage point.

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