The Fed’s Daley said the reduction in asset purchases could begin as early as this year


Federal Reserve Update

A senior official of the U.S. Central Bank said that given the strength of the economic rebound, the Fed may begin to reduce its ultra-loose monetary stimulus measures before the end of the year.

In an interview with the Financial Times, San Francisco Fed President Mary Daly expressed the belief that as more and more people, the strong recovery of household and business activities from the depths of the Covid-19 collapse will continue to strengthen momentum. Return to work Consumer spending remains strong, laying the foundation for a policy shift in the coming months.

“I am still very optimistic and positive about the decline and the continued improvement of the key variables we care about,” she said on Wednesday. “For me, this means that it is appropriate to start discussing lowering the level of easing we regularly provide to the economy, and the starting point is of course asset purchases.

“Talking about the possibility of gradual reduction later this year or early next year is where I am,” said Daly, who has been one of them for a long time.Dovish“Members of the Federal Reserve advocate withdrawing support in a patient manner.

The Fed has stated that it will continue to purchase US$120 billion in agency mortgage-backed securities and US Treasury bonds each month until it achieves “substantial further progress” in achieving the goal of 2% average inflation and maximum employment.

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Daley is a voting member of the Federal Open Market Committee, which sets the policy, and he said that these thresholds may be reached by the end of this year or early 2022.

Her comment is after another promotion inflation Data on Wednesday showed that the year-on-year price increase was stable at 5.4%, although the increase was milder than the previous month. Prices in some industries that are more sensitive to pandemic disruptions have also slowed down from previous months.

The labor market also makes Significant progress, 943,000 new jobs were created in July. The unemployment rate fell to 5.4% from 5.9% in June.

“We did add enough jobs to prove that we are making progress towards the goal of full employment,” Daly said. “We haven’t arrived yet… [but] We are clearing the hole dug by Covid. “

Compared with February 2020, nearly 6 million Americans are still unemployed. Daly said that she expects this gap to shrink as pandemic fears fade, child care issues are resolved, and increased unemployment benefits are phased out.

The improved economic background gave birth to a booming development debate Fed officials on the appropriate steps to withdraw their support. The past week marked a turning point, with more and more central bank governors giving reasons for exiting financial markets faster than many initially expected.

On Wednesday, Esther George, chairman of the Kansas City Fed and who will become a voting member of the committee in 2022, said that it is time to “transition from unconventional monetary policy easing to a more neutral environment”.

“Although it is recognized that special factors are the main reason for the current surge in inflation, in my opinion, the expectations of continued strong demand, the recovery of the labor market, and firm inflation expectations are consistent with the Committee’s guidance on making substantial progress towards its goals,” George said at a seminar organized by the National Association of Business Economics. “I support ending asset purchases in this case.”

Her views are very consistent with those of St. Louis Fed President James Brad and Dallas Fed Robert Kaplan, the latter said in a statement interview CNBC said on Wednesday that he supports the announcement in September to cut production starting in October. This is also in line with the timetable proposed by Fed Governor Christopher Waller earlier this month, as long as the upcoming employment data remains stable.

Rafael Bostic of the Atlanta Fed, Eric Rosengren of the Boston Fed and Thomas Barkin, the chairman of the Richmond Fed, also weighed this week. Everyone thought that inflation had reached the point and started to decrease. The level required for bond purchases.

Fed officials said the main risk to the outlook is the alarming spread of the more contagious Delta coronavirus variant-although Daley said it may have limited economic impact.

“In general, I don’t think this will undermine our recovery,” she said.



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