MHI Solutions Improving Supply Chain Performance
By Jason Schenker
The outlook for 2021 is solid—especially compared to 2020. In general, the year should be one of positive growth and improvements in economic activity, even if the trend of improvements is occasionally punctuated by intermittent COVID-19 outbreaks and systemic aftershocks in industries that have experienced asymmetric negative impacts in the wake of the COVID pandemic outbreak.
Buttressing growth
The most important support for growth this year will be accommodative monetary policies. The Fed is poised to continue buying mortgages and treasuries to depress interest rates and support debt market liquidity for quarters—or even years—to come. Additionally, the Fed has signaled in no uncertain terms that it intends to maintain very low interest rates near zero for years to come.
The Fed is apolitical, so the wild dynamics around the 2020 elections will have no bearing on the course the Fed chair and FOMC have charted for 2021. In fact, if the economy stalls or if housing weakens on elevated unemployment and joblessness, the Fed could intervene further to support growth.
However, while the Fed could do more to support growth, it is unlikely to become less accommodative. This is because the Fed usually becomes less accommodated because of concerns about inflation. But that is not really a concern this year. In fact, the Fed clearly signaled last year that even if inflation rises above its historical 2% target, they will not act until the jobs return. In short, the Fed intends to let inflation run hot if necessary. It seems like cheap money is here to stay, and that’s good for growth.