Washington (AFP)

The Fed, the American Central Bank, will see the economy improve on Wednesday thanks to the acceleration of the vaccination as well as the Biden plan, suggesting difficult choices in terms of monetary policy in the coming months.

More than one in ten Americans is now fully vaccinated against Covid-19, checks for $ 1,400 started mailing Americans this weekend, and spring is almost here.

Bars and restaurants are preparing to find their regulars, the planes should fill up again.

As for factories, they have worked hard in recent months to prepare to meet increased demand from customers hungry to consume after a year of deprivation.

In December, the Fed expected growth of 4.2% and an unemployment rate of 5% for 2021. But that was before the adoption at the end of the same month of a stimulus package of 900 billion dollars. , followed by a 1.9 trillion plan whose law was signed by Joe Biden last week.

"The improvements will be reflected in the economic forecasts" of the Fed's monetary committee, which will be published at the end of the meeting, anticipates Diane Swonk, economist for Grant Thornton, in a note.

For 2021, she expects to see "a significant improvement in (forecast) growth, somewhat higher inflation and lower unemployment".

Because after a halt in February due to the winter storm that paralyzed part of the country, the US economy should rebound strongly this month with a jump in consumer spending.

- "Oil on the fire" -

The economic outlook is for the Fed "a delicate balancing act", summarizes William De Vijlder, chief economist of the BNP Paribas Group, in a note.

On the one hand, "ignoring these positive developments from the perspective of interest rates, which runs until 2023, could damage their credibility".

On the other hand, "adjusting projections upwards (...) risks adding fuel to the fire", and thus "causing a new surge in yields" on Treasury bills.

For now, the US Central Bank will maintain its interest rates on Wednesday, between 0 and 0.25%, and should not reduce its asset purchases.

With speculations on a return of inflation in the coming months, the markets had bet on a possible rise in interest rates to avoid this surge in prices.

But the president of the institution Jerome Powell made it clear that it was premature.

Raising rates too quickly would slow down the recovery and therefore the return to full employment, one of the Fed's missions.

- Unanimity or not -

The Fed believes that 2% inflation is an optimal target to achieve full employment without overheating the economy.

However, before the Covid-19 pandemic, inflation remained muted despite the good economic health.

For Jerome Powell, therefore, prices are unlikely to rise out of control.

The powerful institution has already said it is ready to tolerate inflation just above 2% for a while.

But "the question (...) is what kind of inflation the Fed will deem temporary and for how long members of the (monetary committee) will actually tolerate it. Is it 3-5% for a few months? Or less?" ? "asks Diane Swonk.

Observers will especially watch for the slightest sign that the Fed can give on its intentions.

An indication could be in the unanimity, or not, of the members of the Monetary Committee (FOMC) on when it will seem appropriate to raise rates.

"We could also see more participants voting to raise rates in 2023", when they were previously rather inclined to expect more, continues Diane Swonk.

In December, only six of the 16 voting members of the FOMC expected one or more rate hikes by 2023. "That number could rise to at least seven of 17 at the March meeting," says Diane Swonk.

Since December, Christopher Waller has joined the voting members.

© 2021 AFP