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Fed’s Kaplan says the U.S. economy will see above-trend growth in 2021

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Fed's Kaplan says the U.S. economy will see above-trend growth in 2021

Dallas Federal Reserve President Robert Kaplan said the U.S. economic growth will accelerate next year as the country rebounds from the coronavirus crisis.

“In ’21, we will see an above-trend growth, and we will continue to grind down the unemployment rate,” Kaplan said on CNBC’s “Closing Bell” on Tuesday. “I still believe if we follow these protocols, we would see a rebound from the deep hole we dug in the second quarter.

“The question is when you get to a normalized economy, and it’s going to depend on the path of the virus and how well we manage it, and the timing of the vaccine,” Kaplan added. “I’m optimistic we will work our way through this. But it would be a lot less costly if we did a good job managing the virus.”

The Fed president said the most important thing for the economy now is wearing protective face coverings. In recent weeks, many states in the U.S. have seen a resurgence in new cases and hospitalizations as the economy started to reopen. 

Kaplan said the economy will suffer a contraction of 4.5% or 5% this year as the coronavirus caused unprecedented disruptions. 

To support the tumbling economy, the Fed has conducted emergency programs that could provide trillion dollars in liquidity and lending, while slashing its key interest rates to zero. When asked if the central bank could do more to help the economy, Kaplan said it still has substantial capacity but the priority for the country right now is to stop the spread of the virus. 

“If we do an outstanding job and a better job managing the virus, we will not need to do as much. That would be better for the country if we didn’t have to,” Kaplan said. 

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