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Rebalancing the U.S. Economy and Monetary Policy

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  • Loretta J. Mester

Abstract

Despite the challenges, U.S. economic growth was very strong last year. Real GDP grew at a 5.5 percent pace, the highest annual pace since 1984. Firms added a record 6.7 million jobs to their payrolls and the unemployment rate moved down to about 4 percent, close to its pre-pandemic level. The economy’s strength reflected very robust demand by households and businesses. This demand was supported by extraordinary fiscal policy and monetary policy, as well as the deployment of vaccinations, which allowed the economy to reopen more fully. But this strong demand came at the same time there were constraints on product supply and labor supply. The imbalances between supply and demand have put significant upward pressures on prices and wages. Inflation readings in the U.S. are at their highest levels in nearly 40 years, and nominal wages are accelerating at a faster pace than we have seen in decades.

Suggested Citation

  • Loretta J. Mester, 2022. "Rebalancing the U.S. Economy and Monetary Policy," Speech 93697, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcsp:93697
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