The United States and other countries are likely to witness strong economic growth driven by vaccination rollout, said Steven Mnuchin, 77th Secretary of the Treasury, the United States of America.
Doha: The United States and other countries are likely to witness strong economic growth driven by vaccination rollout, said Steven Mnuchin, 77th Secretary of the Treasury, the United States of America. He was speaking during the inaugural Qatar Economic Forum, Powered by Bloomberg.
The high-profile forum began yesterday, which is witnessing participation of over 100 speakers and more than 2,000 government leaders, chief executives, influential voices and decisionmakers in the fields of finance, economics, investment, technology, energy, education, sports.
“Now with the advent of vaccines being distributed and at large scale and a better understanding of the disease, I think you are seeing the economies opening up and you are going to see very strong growth rates particularly in the US but also in other areas of the world,” said Steven Mnuchin while talking to David Westin, Host, Bloomberg Television, yesterday.
He said there are chances of inflation remaining firm in the US. “In the foreseeable future, we could easily see 6-8 percent growth. Inflation is good for certain parts of the economy and very bad for other parts of the economy. I do worry that the chances are higher as opposed to lower that this is ongoing inflation and the fed would need to adjust for that,” said Mnuchin.
He added that the US Federal Reserve should manage inflation situation carefully.
“I think in the interim there will be businesses that are growth business, high margin businesses with consumer spending that will do very well with higher inflation, and business with lower margins and high cost of labour are going to be concerned. So I think inflation outlook is something that going to need to be managed very carefully,” he said.
The Former Treasury Secretary said he believes inflation will force the Federal Reserve to tighten monetary policy in the coming months and years, a scenario investors may not be prepared for.
“There’s no question the Fed needs to go into a period of normalizing rates and normalizing the portfolio” of bond holdings.
Mnuchin said he worried that the recent spike in inflation would persist. He suggested the Federal Reserve was reacting cautiously in part because it relies on economic models that are struggling to incorporate massive amounts of fiscal and monetary policy stimulus that are feeding into price movements.
“I think this is something that needs to be watched very carefully and I do think the markets are underestimating this risk,” he said.
The US Federal Reserve, last week, had surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected.
Fed officials sped up their expected pace of policy tightening amid optimism about the labor market and heightened concerns for inflation. Their forecasts show they anticipate two interest-rate increases by the end of 2023, sooner than many thought, and they upgraded estimates for inflation for the next three years.
The Federal Reserve on Wednesday held its benchmark short-term interest rate near zero and said it would continue to inject money into the economy through monthly bond purchases. The US central bank brought forward its projections for the first post-pandemic interest rate hikes into 2023 from 2024.
