Fed officials say tapering could still get started this year
Several Federal Reserve policymakers on Wednesday signaled that the U.S. central bank remains on track to trimming its massive asset purchases this year, despite the slowdown in jobs growth seen in August and the impact of the recent COVID-19 resurgence.
- Fed's Bullard says stimulus tapering should begin this year
"The big picture is that the taper will get going this year and will end sometime by the first half of next year," said St. Louis Fed Bank President James Bullard in an interview with the Financial Times here.
Bullard dismissed concerns that the labor market recovery was faltering after the U.S. economy in August created the fewest jobs in seven months. He said the labor market could be “very strong” going into next year if the fight against the pandemic continues to improve.
- Fed's Kaplan downgrades 2021 GDP forecast, sticks to taper call
Dallas Fed President Robert Kaplan in a separate appearance said he still supports a gradual wind down of monthly asset purchases starting in October, as long as the economic outlook does not fundamentally change.
“Fear of infection is having an impact” on demand, Kaplan acknowledged at a Dallas Fed Town Hall, adding that he has downgraded his forecast for economic growth this year to 6%, from 6.5%. But he predicted that next year, the economy will grow at about 3% and inflation will rise 2.6%.
- NY Fed's Williams says decision on tapering is not indicative of rates liftoff
Any decision the Federal Reserve makes regarding when and how to slow the pace of its asset purchases are separate from its decisions on when to start raising interest rates, New York Fed Bank President John Williams said on Wednesday.
“I don’t see any decision we make in terms of tapering as indicative of what the timing” will be for lifting rates, Williams told reporters during a video conference. “They really do have very different kinds of thresholds around them.”
Earlier in the afternoon, Williams said he thought it would be appropriate for the Fed to start tapering its asset purchases this year if the economy continued to improve.
Fed officials will meet again in two weeks on Sept. 21 and 22.
Dollar pares gains on dovish Fed speak, before ECB meeting
The dollar pared gains on Wednesday as Treasury yields dipped after a Federal Reserve official offered a dovish outlook on the economy, and a day ahead of a European Central Bank policy decision.
The dollar index, which measures the currency against six rivals, gained 0.14% to 92.66, after earlier rising to 92.86, the highest since August 27.
Benchmark 10-year Treasury note yields fell to 1.33%, after earlier trading at 1.38%. The yields have risen since data on Friday showed that U.S. jobs growth slowed while wage inflation was higher than expected.
An uptick in inflation is complicating the picture for Fed officials who want to see further progress in employment before reducing bond purchases.
Reference: CNBC, Reuters
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