for release on delivery 10 : 10 a. m. edt march 25, 2021 u. s. economic outlook and monetary policy remarks by richard h. clarida vice chair board of governors of the federal reserve system at the 2021 institute of international finance washington policy summit washington, d. c. ( via webcast ) march 25, 2021 it is my pleasure to meet virtually with you today at the 2021 institute of international finance ( iif ) washington policy summit. 1 i regret that we are not doing this session in person, but i do hope next time we will be gathering together in washington. i look forward, as always, to a conversation with my good friend and onetime colleague tim adams, but first, please allow me to offer a few remarks on the economic outlook, federal reserve monetary policy, and our new monetary policy framework. current economic situation and outlook in the second quarter of last year, the covid - 19 pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the u. s. economy since the great depression. gross domestic product ( gdp ) collapsed at a roughly 31. 5 percent annual rate in the second quarter of 2020, more than 22 million jobs were lost in march and april, and the unemployment rate rose from a 50 - year low of 3. 5 percent in february to almost 15 percent in april. since then, economic activity has rebounded, and it is clear that the economy has proven to be much more resilient than many forecast or feared one year ago. gdp grew by almost 8 percent at an annual rate in the second half of last year, and private forecasters project that gdp will grow roughly 6 percent — and possibly 7 percent — this year. as shown in the latest summary of economic projections ( sep ), the median of federal open market committee ( fomc ) participants ’ projections for 2021 gdp growth is 6. 5 percent. 2 if these projections are realized, gdp will grow at the the views expressed are my own and not necessarily those of other federal reserve board members or federal open market committee participants. i would like to thank chiara scotti for her assistance in preparing these remarks. the most recent sep is available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / fomccalendars. htm. - 2fastest four - quarter pace since 1984. and, as this is

it is worth emphasizing that the fed ’ s purchases of longer - term securities are not comparable to ordinary government spending. in executing these transactions, the federal reserve acquires financial assets, not goods and services. ultimately, at the appropriate time, the federal reserve will normalize its balance sheet by selling these assets back into the market or by allowing them to mature. in the interim, the interest that the federal reserve earns from its securities holdings adds to the fed ’ s remittances to the treasury ; in 2009 and 2010, those remittances totaled about $ 120 billion. more specifically, the fed ’ s purchases should tend to reduce term premiums, a component of the yield to longer - term securities. longer - term interest rates are also influenced by market expectations of the future path for short - term interest rates, which in turn depend on the outlook for the economy and so for the target federal funds rate. most committee participants judge that, in the longer term, inflation in the range of 2 percent or a bit less appropriately balances the risk that adverse economic shocks could tip the economy into deflation against the benefits of low and stable inflation. an inflation rate modestly above zero also reduces the probability that monetary policymakers will be constrained from easing policy when necessary by the zero lower bound on nominal interest rates. many central banks around the world have come to similar quantitative judgments about the long - run level of inflation that best fosters growth and stability. bis central bankers ’ speeches fiscal policy fiscal policymakers also face a challenging policy environment. our nation ’ s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession. to a significant extent, this deterioration is the result of the effects of the weak economy on revenues and outlays, along with the actions that were taken to ease the recession and steady financial markets. in their planning for the near term, fiscal policymakers will need to continue to take into account the low level of economic activity and the still - fragile nature of the economic recovery. however, an important part of the federal budget deficit appears to be structural rather than cyclical ; that is, the deficit is expected to remain unsustainably elevated even after economic conditions have returned to normal. for example, under the congressional budget office ’ s ( cbo ) so - called alternative fiscal scenario, which assumes that most of the tax cuts enacted in 2001 and 2003 are made permanent and that discretionary spending rises at the same rate as