Vaccination and stimulus are fueling a rebound for America's most depressed industries, Fed says

• Vaccine distribution and "strong policy support" helped boost the US economic recovery, the Fed said.
• The central bank decided on Wednesday to hold its benchmark interest rate near zero, as expected.
• Sectors hit hardest by the pandemic "remain weak but have shown improvement," the Fed said in a statement.

Widespread vaccination and "strong policy support" have fueled a considerable pick-up in the pace of economic recovery, Federal Reserve Chair Jerome Powell said.

The Federal Open Market Committee concluded its two-day April meeting on Wednesday and ruled to maintain its ultra-accommodative policy stance. Policymakers held the Fed's benchmark interest rate near zero and maintained the pace of asset purchases of at least $120 billion per month.

Additions to the Fed's post-meeting statement shed light on the central bank's increasingly bullish outlook. Progress on vaccination and support from fiscal policy - a nod to Biden's $1.9 trillion stimulus plan - led indicators for economic activity and employment to "strengthen," the central bank said in a statement.

Sectors hit hardest by the pandemic's economic fallout "remain weak but have shown improvement" since the FOMC's last meeting in mid-March, the Fed added.

The central bank noted that inflation had firmed up in recent weeks, but attributed the stronger price growth to "transitory factors."

"During this time of reopening, we are likely to see some upward pressure on prices. But those pressures are likely to be temporary, as they are associated with the reopening process," Powell said during a Wednesday press conference, adding that a one-time bounce "is not the same thing as, and not likely to lead to, persistently higher year-over-year inflation."

Powell reiterated in a Wednesday press conference that policymakers still aren't considering any form of pullback in asset purchases. The improving rate of recovery has led investors and economists to mull when the central bank will start to rein in its emergency policy. The progress, while welcome, isn't the "substantial further progress" the Fed has established as necessary for any sort of policy normalization, Powell said.

The Fed also warned that the path toward a full recovery remains uncertain as virus cases are elevated across the country. Officials are also "very worried" about long-term scarring in the labor market that would leave Americans unable to rejoin the labor force, Powell said. The economy will look different after it emerges from the health crisis, and while the recovery is moving faster than previously expected, the country remains "a long way from full employment," he added.

Separately, evidence of worker shortages in the service industry raised concerns in recent weeks that hiring could hit snags while millions of Americans remain out of work. Some economists linked the deficit to expanded unemployment benefits, which have provided bolstered incomes for Americans who lost their jobs during the pandemic.

While Powell strayed from linking such shortages to any specific factor, he expressed optimism that the labor market "will reach equilibrium," even if it takes a few months.

"Unemployment insurance benefits will run out in September, so to the extent that's a factor, which is not clear, it will no longer be a factor fairly soon," he said. "My guess is that we'll come back to this economy where we have an equilibrium between labor supply and labor demand."