TRND - An Update Of The Output Gap

• In August 2020, the Congressional Budget Office projected a wide 6.6 percentage point gulf between actual and potential GDP in 2020.
• The CBO also in August 2020, projected that the output gap would persist for the entire decade.
• The latest February 2021 CBO projection now shows that the output gap would fully close by late 2024.
• The consensus among financial market participants is that neither enormous deficits nor a rebound in economic activity will spur the Federal Reserve to alter its accommodative policy.
• The February 2021 CBO projection does not take into account any extra growth that could result from the new proposed $1.9 billion stimulus bill.

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