Vaccine Boosts Fed Confidence That Worst-Case Outcomes Can Be Avoided

Federal Reserve officials have something new to talk about at their policy meeting this week: good news.

This might sound a little absurd. Covid-19 infections, hospitalizations and deaths are hitting records. States and localities are imposing new restrictions on dining and other activities. Claims for unemployment benefits are rising, and the jobless rate fell in November for the wrong reasons—more workers stopped seeking jobs.

But last week’s emergency authorization by the U.S. Food and Drug Administration of a coronavirus vaccine developed by Pfizer Inc. and BioNTech SE , plus a second candidate from Moderna Inc. also under review, is a potential economic game-changer because it could reduce uncertainty for households, businesses and policy makers.

“There is a bridge to somewhere now. You’re no longer just putting fingers in a dike that’s about to burst,” said Diane Swonk, chief economist at accounting firm Grant Thornton. “We still have a lot of wounds to dress. But now you can see an end date, and it’s likely to happen in 2021.”

Fed officials face an economic outlook with little precedent. Economic growth is at risk of slowing further in the next few months and then revving up. How to navigate these developments will be the focus of the central bankers’ two-day meeting that concludes Wednesday.TO READ THE FULL STORY.

Source: WSJ

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