Fed’s Bowman ‘very comfortable’ with November taper, sees inflation risks

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October 13 (Businesshala) – Federal Reserve Governor Michelle Bowman said on Wednesday that she is looking at some of the US central bank’s plans for the economy as soon as next month, citing concerns about inflation and assets. Will be “very comfortable” with withdrawing support. bubbles

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The Fed’s purchases of Treasury and mortgage-backed securities have been a focus of its COVID-19 response, which has been credited with easing the financial crisis by lowering borrowing costs and stimulating investment and reopening the economy. goes.

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“I note that the remaining benefits to the economy from our asset purchases now outweigh the potential costs,” Bowman said in an address to South Dakota State University. “Provided that the economy continues to improve as I expect, I am very comfortable at this point with the decision to reduce my asset purchases before the end of the year and, preferably, at our next meeting in November.”

Last December, with millions of Americans still unable to find jobs, the Fed promised to buy $120 billion worth of bonds each month until the economy was “substantially progressing” toward full employment and the Fed’s 2% inflation target. Would do it

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Last month, Fed Chairman Jerome Powell indicated that the end of that program was drawing near. Inflation, which has been running above 2% for months, had met the test of “considerable forward progress”, and the economy was far from meeting that benchmark on the employment front, with a “decent” jobs report, he said. .

Behind closed doors, Fed policymakers had become more concerned about inflation risks and were gathering around plans to begin withdrawing support for the economy before the end of the year.

Last week the Labor Department reported that the economy added 194,000 jobs in September, well below analysts’ expectations but widely seen as enough to meet Powell’s “decent” hurdle.

Bowman said on Wednesday she sees progress in jobs, but there will be no return to pre-pandemic levels of employment anytime soon. Even businesses offering higher wages and signing bonuses, he said, are having trouble recruiting employees.

Millions of women and older workers have left the labor force during the pandemic, data shows, and the longer people are out of work, the harder it will be for them to come back – a problem that the Fed’s monetary policies seem to address. Not suitable, she said.

Meanwhile, rising wages could begin to put pressure on inflation, adding to price pressures from supply-chain constraints, which could last longer than previously expected, she said. He said rising home prices were hurting low-income households and bankers began to express concerns about a potential home-price bubble.

The Fed’s asset purchases have “essentially served their purpose,” Bowman said, adding that continuing them poses a worrying risk. “In particular, I worry that our asset purchases may now contribute to valuation pressures, particularly in the housing and equity markets,” it said, adding that maintaining the Fed’s easing monetary policy is now “stability of long-term inflation expectations.” could pose a risk to.” “

Reporting by Ann Sapphir Editing by Chris Reese and Leslie Adler


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