Policy makers should “get started” and begin to slow asset purchases even though the delta variant poses a risk to the U.S. economic outlook and to job growth, Federal Reserve Bank of Kansas City President Esther George said.
“I don’t think it changes my own calculus that it is time to begin to make those adjustments given the gains we have seen so far,” George said in a Bloomberg TV interview with Michael McKee conducted Wednesday evening, prior to the bank’s annual symposium on Friday, which will be held virtually this year for a second year because of the Covid-19 pandemic.
“I think it’s important to get started and the conditions of pace, timing of when we end, I’m open minded to listening to the debates around that,” George said. “But I am less interested in deferring that decision.”
The Kansas City Fed leader, who is not a voter this year on the policy-setting Federal Open Market Committee, later suggested she might have some flexibility on when the taper should actually be implemented, saying “I think we should get started this year so that we can begin to pare the amount of accommodation.”
Fed officials have highlighted increased risks from the delta variant, which could affect the pace of economic recovery from the pandemic and alter the central bank’s willingness to slow its monetary stimulus. Policy hawks like Dallas Fed President Robert Kaplan have said they would be open to adjusting calls for a quick tapering of bond buying if delta hurts the economy’s progress.
“The economy continues to grow at a strong rate,” George said, adding that in terms of the potential risk of the delta variant, “you can imagine that it might slow down some of the returns to the labor market. But I don’t expect at this point that it will derail the economy as we saw last year when we first had to deal with the virus.”
Most Federal Reserve officials agreed last month they could start slowing the pace of bond purchases later this year, judging that enough progress had been made toward their inflation goal, while gains had been made toward their employment objective, according to the minutes of the Federal Open Market Committee’s July 27-28 meeting.
The Fed has pledged to buy $80 billion in Treasuries and $40 billion in mortgage securities a month until the economy shows “substantial further progress” on inflation and employment as it recovers from Covid-19.
The Kansas City Fed shifted its annual gathering last Friday in light of elevated health risks outside Jackson, Wyoming. Covid-19 cases have spiked across the country as the delta variant spreads, spurring companies to re-evaluate return-to-work plans and schools to return to virtual education, quarantines and mask requirements.
This article was provided by Bloomberg News.