The Fed’s Bowman is ‘very comfortable’ with the November taper, seeing the risk of inflation by Reuters

ছবি Photo from Reuters file: U.S. Federal Reserve Governor Michelle Bowman made her first public remarks as a Fed policymaker at an American Bankers Association conference in San Diego, California, on February 11, 2019. Reuters / Ann Sapphire / File photo

Written by Ann Safir

(Reuters) – Federal Reserve Governor Michelle Bowman said Wednesday that she would be “very comfortable” as soon as she begins withdrawing US Federal Reserve’s crisis-era aid to the economy next month, citing concerns about inflation and asset bubbles.

The Fed’s purchase of Treasury and mortgage-backed securities was a focal point of its Covid-1 response, encouraging investment by reducing cred spending to end the economic crisis and hiring as the economy revived.

In a speech to South Dakota State University, Bowman said, “I think the remaining benefits of the economy from the purchase of our assets have probably outweighed the potential costs.” “If the economy continues to improve as I expect, I feel very comfortable at the moment that we will decide to reduce our asset purchases before the end of the year, and especially at our next meeting in November.”

Last December, millions of Americans still unable to find work, the Fed promised to buy 120 120 billion a month in bonds until the economy achieved “significant progress” toward full employment and the Fed’s 2% inflation target.

Last month, Fed Chair Jerome Powell indicated that the end of that program was imminent. He said inflation, which has been hovering above 2% for several months, has met the test of “significant further progress”, and the economy was reporting a “decent” job far from meeting those standards in terms of employment.

Behind closed doors, Fed policymakers became more concerned about the risk of inflation and rallied with plans to begin withdrawing support for the economy before the end of the year.

The Department of Labor reported last week that the economy added 194,000 jobs in September, far short of analysts’ expectations but widely seen as meeting Powell’s “decent” barrier.

Bowman said Wednesday that he sees progress on the job but will not return to the pre-epidemic stage of the job soon. Even though businesses offer higher wages and signature bonuses, he said they are having trouble recruiting staff.

Millions of women and older workers left the workforce during the epidemic, data show, and the longer people stay away from work, the harder it will be for them to return – a problem that the Fed’s monetary policy is unsuitable for. , He said.

Meanwhile, higher wages could begin to push into inflation, pushing up price pressures from supply-chain disruptions that could last longer than previously expected. Rising home prices are hurting low-income households and bankers are starting to worry about potential home price bubbles.

The Fed’s asset purchases “essentially served their purpose,” Bowman said, adding that their continuing carries alarming risks. “In particular, I am concerned that our asset purchases may now contribute to valuation pressures, particularly in the housing and equity markets,” he added, adding that maintaining the Fed’s simple monetary policy now could “create risks to the stability of long-term inflation expectations.”

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