U.S. Federal Reserve officials said that more fiscal support and the mass distribution of vaccines could lead to a strong U.S. economic recovery in the second half, setting the stage for a discussion of potential tapering of bond buying before year’s end.

“I do think you’re looking at a second half that is going to be very strong and the question I think is how do we get through where we are today to that second half,” Fed Richmond Bank president Thomas Barkin, who votes on monetary policy this year, said Monday.

The Fed last month signaled interest rates would stay near zero at least through 2023 and said it would keep buying bonds at a US$120 billion monthly pace until it has seen “substantial further progress” toward its goals for employment and inflation.

“I’m open to that” potential late-2021 tapering, Fed Atlanta Bank president Raphael Bostic said after a speech Monday. “A lot of it will depend on how the virus and the vaccine distribution goes. But if it goes well — if we learn quickly — I think there is some good upside potential.”

Bostic said growth could turn out to be stronger than expected, which he noted could lead to a discussion of raising rates in the second half of 2022 or 2023 — earlier than other policymakers are forecasting.

Barkin wouldn’t predict a date but sounded optimistic about the U.S. outlook, while acknowledging the early part of the year would be weakened by the continuing COVID-19 crisis. Still, fiscal support and an elevated savings rate would create backstops for the economy, he said.

“We’ve given outcome guidance, not date guidance so I couldn’t tell you the day. I do think this notion of ‘substantial further progress’ is the right way to think about it,” he said. “So there are scenarios certainly where we see strong recovery in unemployment and inflation, but there are lots of scenarios where we don’t.”(SD-Agencies)