WRAPUP 1-Fed doves look to midsummer for clarity on economy

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Nov 9 (Businesshala) – Two of the top US central bank policymakers said on Tuesday they expect to get more clarity on the post-pandemic economic outlook by next summer, when the Federal Reserve is expected to end its asset purchases. are supposed to.

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Whether that clarity reassures them that interest rates should remain at their current near-zero levels for another year or more, or prompts them to join half of their fellow Fed policymakers in favor of more immediate rate hikes. support will depend on two main factors, their observations suggested: if inflation is starting to fall below what they expected, and if workers are returning to the labor force as long as expected.

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Minneapolis Federal Reserve Bank Chairman Neil Kashkari, who in September was the Fed’s only policy maker to leave rates at their current near-zero levels by 2024, said on Tuesday he was keeping an “open mind” on monetary policy. are.

With the latest COVID-19 surge in the United States but still disrupting economies globally, “we are getting these mixed signals from the economy,” Kashkari said at an event at the University of Wisconsin-Eau Claire.

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For example, wages are rising, but the US economy is supporting an estimated 5 million to 7 million fewer jobs that could have been expected had there been no COVID-19 crisis, and the percentage of the population that is working or wants to work. Halted at 61.6%, which is well below pre-pandemic levels, the data shows.

Inflation is well above the Fed’s 2% target, driven by factors that should be temporary — supply-chain disruptions as well as demand growth as the economy reopens — but for longer than previously thought It is proving to be running, Kashkari said.

“I am optimistic, in the next three, six, nine months we will have a lot more information” and clarity about whether the millions of people who left the workforce during the pandemic will come back, he said. If they don’t, “it’s going to give me more concern that the high inflation readings we’re seeing could persist.”

Earlier on Tuesday, San Francisco Federal Reserve Bank President Mary Daly also set her clock to mid-2022, telling a National Association of Business Economists virtual meeting, “Let’s be patient” on the policy and to see if Wait if inflation subsides when the pandemic happens, as she expects it.

He added that raising interest rates too soon will do little to bring down prices, but will “absolutely” slow down the pace of job gains.

“It’s too high a risk to take when we have no indication that these are consistent trends today,” she said.

“I’m looking at the summer of 2022 when we should – knock on wood, no more types, no more delta surges – get some clarity” on whether inflation will persist after the pandemic and if labor supply is really tight, As many employers say it is, or if higher wages and a better public health environment bring more people back into the job market.

Meanwhile, it could be a “challenging time” as consumers have to pay more for gasoline and food and other necessities, she said.

On Monday, Chicago Fed Chairman Charles Evans, who also leans, said he also thinks inflation is being driven mostly by COVID-19-related supply shortages that will fade. But he said he is less confident than he was three or four months ago, and appeared to be setting a more rapid timetable to prove his hopes.

“By spring we’re going to know a lot more about it, and if I’m still making the same excuses, boys will be making really good excuses because it just doesn’t look quite right,” he told reporters. (Reporting by Ann Safir; Editing by Jonathan Otis)

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