· Stricter confinement measures slow down the distribution of vaccines and would push the Eurozone into a new recession.
· Kaplan (Dallas FED) and Barkin (Richmond FED) agree with other members of the FED: Talks of withdrawing monetary stimulus may begin towards the end of 2021.
· Private consumption increased 1.1% in Mexico during October; gross fixed investment increased 2.8% in the same period.
Chances of seeing a second recession in the Eurozone have increased during the 1Q21, according to analysts most recent growth forecasts. Growth estimates in the Eurozone have once again been revised downwards and contractions are forecasted for the 4Q20 (-1.5% quarterly) and in the 1Q21 (-4.1%) as the virus`s second outbreak during the winter has affected economic activity in the region. Additionally, there have been commercial disruptions because of Brexit and the slow distribution of vaccines in the continent, which could slow down the expected economic recovery in Europe even in the second quarter of the year. The expected contraction at the start of the year could put more pressure on the European Central Bank to maintain or even increase monetary support; it would put more pressure on several countries finances, who may have to continue to carry out fiscal stimulus for a longer period of time. The most affected economies will be those who depend on services, such as France; meanwhile, Germany, whose manufacturing sector is much larger, could sustain adverse effects. The recovery could be seen in spring with fewer amounts of COVID-19 cases and economies reopening. The fiscal package approved in the EU is also expected to boost growth in the second half of the year.
More members of the FED expect to see a strong rebound in the US economy in 2021, enough to start conversations of withdrawing stimuli. Members of the FED have reiterated their expectations of seeing a firm economic recovery in 2021 in public speeches; backed by fiscal stimulus and spending plans on behalf of the new administration, which counts on Congress`s almost full support. The mass distribution of vaccines could be the main trigger of an even faster recovery in the second half of the year, which could be enough to start talks of de-escalating the asset purchasing program, which currently injects $120 billion monthly dollars in US debt markets. Chair of the Dallas FED Robert Kaplan assured in an interview that he expects to see a 5% growth in the economy this year and that, if there are no more constraints because of the pandemic, this could open up discussions of possibly withdrawing extraordinary stimuli. Thomas Barkin of the Richmond FED assured that the first half of the year will be complicated, but showed optimism regarding the rest of the year and assured that high levels of savings and fiscal stimulus will be enough to avoid another downfall in the economy. The FED has recently made known that it expects to see “substantial progress” regarding its inflationary and employment targets before taking out any stimuli. For Bostic, the level of unemployment should go lower than the current 6.7% and inflation should increase substantially above the current 1.4% to open up the possibility of changing the stance on the monetary policy front. However, some scenarios of this happening this year do exist, he assured.