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From vaccines to masks, Fed’s prescription for the economy ventures far beyond interest rates

The central bank’s leaders are increasingly pointing to vaccines as what’s needed to carry the economy through to the other side

Federal Reserve Chair Jerome H. Powell testifies before a House committee hearing on Capitol Hill on Dec. 2, 2020. (Greg Nash/Pool/AP)

A sprawling stimulus package may be the next shot in the arm for the economy, but the Federal Reserve is making it clear the recovery also hinges on literal shots in Americans’ arms.

Central bankers tend to talk about interest rates and asset purchases when it comes to policy. But in a downturn as unusual as the coronavirus pandemic, the Fed is increasingly leaning on a new vocabulary set — one that may seem drawn from a medical textbook instead of an economics one.

Whether talking about mask-wearing or social distancing, the Fed’s message increasingly is that healing the economy will require ending the public health crisis. And at their January policy meeting, Fed leaders discussed speedy vaccine delivery as a must-do to carry the economy through to the other side, according to meeting notes released Wednesday.

Federal Reserve Chair Powell says ‘nothing more important’ to economy than vaccinating Americans

Policymakers pointed to risks tied to new coronavirus strains, possible public resistance to vaccines and issues with production and distribution of the shots. On the flip side, an effective vaccine program, mixed with aid from Congress, could improve the outlook ahead, the notes said.

“There’s nothing more important to the economy right now than people getting vaccinated,” Federal Reserve Chair Jerome H. Powell said at a news conference following last month’s meeting.

Powell and his colleagues are quick to leave medical advice to the experts. But their overarching point is that the economy and public health are intertwined like never before.

“Using traditional metrics to gauge or understand the path of the economy has not proven very effective,” said Tim Duy, an economist at SGH Macro Advisors and the University of Oregon. “It’s a very large change in how the Fed views its role in supporting the economy in a much more diverse and inclusive fashion.”

Powell and other Fed leaders have long argued that basic health protocols go hand in hand with monetary policy or more aid from Congress. But the vaccine push has been viewed by some economists as an endorsement of the stimulus package currently working its way through Congress. President Biden’s $1.9 trillion stimulus proposal includes hundreds of billions of dollars toward the pandemic response, including a national vaccine program, expanded testing and funding to help schools safely reopen. The White House said last week that it will have enough vaccine doses for 300 million people by end of July.

Fed chair: Unemployment rate was closer to 10 percent, not 6.3 percent, in January

“The virus is the bottleneck in the economy,” said David Beckworth, a monetary policy expert at the Mercatus Center, a libertarian think tank at George Mason University. The Fed’s focus on vaccines and other health tools is “a consistent but more focused message that ‘we’ve got to get the virus taken care of,'" Beckworth said.

At the Fed, that message mission is core to restoring the 10 million jobs still missing from the labor force and pumping momentum into a recovery that shows signs of leveling off. And Powell and others have signaled that their job doesn’t stop when the workforce is back to its pre-pandemic strength.

In a speech last week, Powell said that steady employment “improves mental health” and “increases life spans” — goals that stretch far beyond the Fed’s more traditional role.

“Our job is not to replace Dr. Fauci,” Powell said last week, referring to Anthony S. Fauci, the nation’s top infectious-disease specialist. “It really is to understand the implications for the economy, and in this particular case, the risks seem to be to the downside, from a slower rollout of the vaccination or less successful rollout, or the new strains. So we monitor all of that.”

Coronavirus: What you need to know

The latest: The CDC has loosened many of its recommendations for battling the coronavirus, a strategic shift that puts more of the onus on individuals, rather than on schools, businesses and other institutions, to limit viral spread.

Variants: BA.5 is the most recent omicron subvariant, and it’s quickly become the dominant strain in the U.S. Here’s what to know about it, and why vaccines may only offer limited protection.

Vaccines: Vaccines: The Centers for Disease Control and Prevention recommends that everyone age 12 and older get an updated coronavirus booster shot designed to target both the original virus and the omicron variant circulating now. You’re eligible for the shot if it has been at least two months since your initial vaccine or your last booster. An initial vaccine series for children under 5, meanwhile, became available this summer. Here’s what to know about how vaccine efficacy could be affected by your prior infections and booster history.

Guidance: CDC guidelines have been confusing — if you get covid, here’s how to tell when you’re no longer contagious. We’ve also created a guide to help you decide when to keep wearing face coverings.

Where do things stand? See the latest coronavirus numbers in the U.S. and across the world. The omicron variant is behind much of the recent spread.

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