A senior Fed official said on Tuesday that the sharp slowdown in job growth last month should not prevent the Fed from starting to scale back its pandemic stimulus program in November.
Atlanta Fed President Raphael Bostic told the Financial Times that the labor market has made enough gains to allow the central bank to reduce or “shrink” its $120 billion monthly size. Asset Purchase Plan, Which was implemented last year to protect the US economy and financial markets from the impact of the crisis triggered by the coronavirus.
“I will start in November very comfortably,” he said in an interview on Tuesday. “I think progress has been made, and the sooner we make progress, the better.”
The Fed has stated that it will purchase U.S. Treasury bonds and agency mortgage-backed securities at the current rate until it sees “substantial further progress” to maximize employment and achieve an average inflation rate of 2%.
Officials have determined that the inflation threshold has been reached, and US consumer price growth is hovering near a 13-year high.Federal Reserve Chairman Jay Powell said last month that the employment goal is “Almost all encountered”, And pointed out that only a “decent” employment report is needed to meet this standard-market participants interpret it as a signal for an announcement in November.
But the extreme of September Disappointing employment reportIt shows that only 194,000 jobs were created this month, compared to 500,000 expected, which may add a wrinkle to the plan.
Bostic said that there are clear signs of potential strength, but the prospects seem bright enough to guarantee a fall in support.
He said that job vacancies are hovering near historical highs, and people who are looking for jobs are looking for jobs. Covid-19 cases also appear to be peaking across the country, which is expected to help alleviate many labor shortages that hinder economic recovery. He also pointed out that broader demand remains strong.
“As long as we have these pillars, employers will signal to me that they will seek to continue hiring to meet this demand, which will eventually translate into some solid growth figures,” Bostic said.
Bostic, a voting member of the Federal Open Market Committee that made policy this year, added that the reduction process should begin as soon as possible to create room for the Fed to raise interest rates as soon as necessary.
Federal Reserve Vice Chairman Richard Clarida said at an event hosted by the banking institution’s Institute of International Finance on Tuesday that he supports the complete end of these purchases around the middle of next year, but reiterated that time should not be interpreted as “sending information about when it might be possible. A signal to raise interest rates.
According to forecasts released last month, Bostic plans to raise interest rates once next year—a view that happens to be shared by half of his colleagues. The other half hope to postpone it to 2023. He said that if the Fed needs to speed up its actions in 2022, he also maintains an “open mind”.
“The more policy space we have, the better,” he said. “Given that we have made this progress, I think we should take strong action to create this space. Now is really the time to move forward, and I will truly advocate with my colleagues that we do this as soon as possible.”
By next year, he expects that the more stringent test of interest rate hikes set by the central bank-the maximum employment rate and inflation rate “moderately” over 2% for a period of time-will be met.
He said there is great uncertainty as to how long these inflationary pressures will last, adding that he often talks with businesses and consumers in his area to assess how they can adapt to longer-lasting supply chain disruptions and higher prices.
Clarida said how long these bottlenecks will last is a “huge unknown.”
When asked about ongoing Transaction dispute In the case of the Fed involving multiple senior officials, Bostic told the Financial Times that the re-evaluation of the rules was “appropriate”, which has since triggered an investigation by the central bank’s board of directors and a comprehensive internal ethics review.
“As an institution, we must do everything we can to maintain the trust of the public,” he said. “I will support anything that improves.”
Clarida’s transaction was recently reviewed, and he referred to the reputation crisis on Tuesday, saying that he has acted “with integrity and honesty” throughout the public service.