U.S. Federal Reserve Governor Mr. Michelle W. Bowman, addressed Colorado, U.S.A., forum of economists during its 40th year celebrations and touched the economic outlook for U.S. Economy for the year 2021 which is reproduced below for meticulous study by serious students or academicians.


To understand his address, it is advisable to go with the flow of his thought and analyze to learn deeper at the end. The study of American economy which reached depths of despair during last year revived dramatically and is on the path of great recovery which is a great success story.

What happened last year and another interesting narration

The pandemic unleashed its ugliest scare on the U S economy starting February/March last year and caused the swiftest and deepest contraction in employment and economic activity unheard of since the great depression in 1929. Money markets, the Treasury market, and other parts of the financial system seized up, and there were fears of another severe economic stress. This leads us to believe the tone of argument and expect the worst to have happened. Is it so?

No, the Federal Reserve (FR) did the unimaginable saving activities.

  • To assist immediately FR started reviving several lending facilities used in the previous crisis and creating several new facilities. It also cut short-term interest rates to near zero and began purchasing large quantities of Treasury and agency securities to help sustain the flow of credit to households and businesses. The Congress as well as the administration also worked to provide effective support. This showed effective in restoring calm and employment and output began growing in May.

The pandemic was severe and effective vaccinations on an un-heard of scale in the world among the common public helped revive confidence among the public and businesses resulting in steep declines in virus-related hospitalizations and deaths. Thus, the economic outlook started brightening. Job creation had stalled over the winter months but improved again starting in February. Over the past year, they had seen a return of nearly 14 million jobs.

Was it so simple and what did the businesses attempt to overthrow the unheard effects of pandemic by working from home and take head on efforts to face up the complete closure of businesses, schools, colleges or complete collapse of travel related activities?

The Governor gives full credit to the businesses who in spite of the risk of closure, with the assistance of the government, however, used the resourcefulness and determination of entrepreneurs, its workers, and their ability to adjust business plans and operations to deal with the effects of social-distancing and operating restrictions. Of course, technology helped a great deal, but businesses were able to find many other ways to maintain operations and sustain their connections to customers.

His actual words are worth mentioning at this juncture.

“In writing the history of these eventful times, I hope that the efforts of these businesses and the strength of America’s market-based economy get the considerable credit they deserve.”

To an inquisitive mind, the current boom in business with facts and figures would give the required energy to reproduce similar atmosphere in India to face up the brightest future.

  • Some of the notable features are: Return to in-person dining as spring arrives and local authorities allowing restaurants to accommodate more diners. For a nation on move with the restaurants as the life line, this augurs well for its population.

In the job market, job gains rebounded to 916,000 in March. He has opined “At our March meeting, my view was broadly in line with the median of projections of other members of the Federal Open Market Committee (FOMC), which anticipated the economy would grow between 5.8 percent and 6.6 percent in 2021. But the outlook has improved since then, and it now appears that real gross domestic product may increase close to or even above the higher end of that range. This annual increase would be the largest in 36 years.” Can one believe that once in a century pandemic with its myriad ways to wreck the whole humanity would result in the record GDP in U.S.A., the largest in 36 years.

Was there any further happy news?

In the job market, job gains rebounded to 916,000 in March. What will be the impact on raging pandemic?

With some schools even aligning with the idea of more in person learning, more labor source participation, and parents willing to return to workforce to strengthen the economy, the outlook started looking good. With the falling rate of deaths due to the virus with its new variants, the Governor is hopeful of returning to the level of October last year and more states and localities easing more economic and social distancing norms, consumers and businesses are encouraged to return to normal activities.

His informing the general public that Colorado state officials would be seriously considering and lifting totally social distancing norms so as to enable businesses and consumers to return to normalcy was a surprise to the audience. As soon as it happens, it will give fillip to the hearts of its citizens longing to return to their old days of free movements and stabilizing the economy.

He was particularly concerned about the effect of pandemic on longer-term effect on small businesses, many of which have been holding on with government aid and loan forbearance programs that would soon expire. He showed his anguish to learn the final count of permanent closures of small business from 2020 onwards though he expected the final tally to be more than he would expect normally expect under earlier circumstances.

But to a valid question about the role of Federal Reserve now and in near future to face the pandemic and drive it out of U.S.A. and to continue the momentum in the economy, the following information may help.

  • With the unpredictable nature of the pandemic with its frequent overtaking of preventive steps like vaccination, sufficient availability of beds and hospital facilities, and near the largest number of citizens got the vaccination in the world, FR is still conservative in its approach. FR last week decided to maintain their highly accommodative stance of monetary policy. Non availability of employment opportunities to some minority groups have attracted the attention of the Governor to step up efforts to improve this area.
  • What about policy mandate of FR? “Over the next several months, I expect that headline inflation measures will move above our long-run target of 2 percent.” This he has firmly stated with the assumption that supply chain bottlenecks in view of rapid increase of pandemic and resultant strong purchase of goods need to be attended to.
  • His assessment of “One prominent example is with semiconductor producers and their need to dramatically alter the mix of production to meet demands of the high-tech and automotive industries” is a case in question which needs an answer to expedite the economy. He argued that the risk that inflation remained persistently above our long-run target of 2 percent still appeared small indicating non taking of rigid postures towards the inflationary trends in view of the most unpredictive nature of the pandemic and the strong performance of the economy wherein all stakeholders from a school child to the biggest industry coupled with state governments along with the federal government played their timely role to resurrect the economy.

His conclusions would gladden any positive oriented reader with overwhelming enthusiasm. The Governor is of the firm view that though the pandemic is capable of changing its contours of development in future, in view of the remarkable capability of business men with resilience and timely adjustment of the processes and systems to face the uncertain economy coupled with the watchful eyes of Federal Reserve with its readiness to face the uncertain future, U.S. economy is on the right path and their policies are in good place.

My conclusion

My enthusiasm to read the worst effect of pandemic on the fastest growing economy of the world, namely, U.S.A. and its efforts to face head on the consequences and take the strongest economic measures to provide the required liquidity and all monetary measures to sustain the economy resulted this reference to Federal Reserve web site which really gladdened my mind and we, as an emerging economy too are on the right track ably supported by our Reserve Bank of India with its timely actions as and when required.


Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author/TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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A banker with 27 years of experience, a CPA from USA with specialization in US taxation, individual, partnership, S corporation or LLC taxation etc View Full Profile

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June 2021