By Ann Saphir
(Reuters) - Despite "very near-term" downside risks to the U.S. economy from the spread of COVID-19 and emergence of new variants, effective vaccines and fiscal relief passed late last year have set the table for stronger growth, Federal Reserve Vice Chair Richard Clarida said on Wednesday.
"Prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished," Clarida said in remarks prepared for delivery to the U.S. Chamber of Commerce.
Clarida said the U.S. central bank's economic forecasts from December, which call for unemployment to fall below 4% and inflation to return to the Fed's 2% target by the end of 2023, would represent a faster rebound than occurred after the financial crisis more than a decade ago.
The Fed will release a set of new forecasts at a policy meeting next month.
In testimony before the U.S. Senate Banking Committee on Tuesday, Fed Chair Jerome Powell said he could see the economy growing in the range of 6% this year, faster than the 4.2% pace Fed policymakers projected in December.
"While our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so as the recovery progresses, it will take some time for economic activity and employment to return to levels that prevailed at the business cycle peak reached last February," Clarida told the Chamber.
"We are committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust and rapid as possible," he said.