US Economy “Close” to Taper Bond Level, Auto News, ET Auto

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Evans had previously said only that he expected a reduction later this year of the current $ 120 billion in monthly Fed asset purchases, which are aimed at lowering long-term interest rates. .

The U.S. economy is on the verge of hitting the Federal Reserve bar for starting to scale back its bond buying program and will meet it soon if job gains continue, the President of the Federal Reserve said on Monday. Chicago Fed Charles Evans, the latest policy maker to back the central bank’s decision to move away from crisis policies during a pandemic.

“I consider the economy to be on the cusp of meeting the standard of ‘substantial further progress’ that we set last December,” Evans said in remarks prepared at the National Association for Business Economics annual conference in Virginia. “If the flow of employment improvements continues, it seems likely that these conditions will soon be met and the reduction can begin.”

Evans had previously said only that he expected a reduction later this year of the current $ 120 billion in monthly Fed asset purchases, which are aimed at lowering long-term interest rates. .

Last Wednesday, Fed Chairman Jerome Powell signaled that the Fed would likely start cutting as early as November after he said following the last policy meeting, in which the Fed kept interest rates close zero, that the economy was at a “decent” monthly employment report. the threshold. The next report is scheduled for October 8.

Since then, two Fed officials, Cleveland Bank President Loretta Mester and Kansas City Fed President Esther George, have said they consider the economy to be in good enough shape already for the bank. Central begins to withdraw extraordinary support.

Unlike some of his colleagues, however, Evans remains convinced that the current higher than expected inflation does not call for an imminent take-off in interest rates once the phase-down is over.

“I am more worried that we are not generating enough inflation in 2023 and 2024 than the possibility that we are living with too much,” Evans said, saying the supply issues that caused inflation to spike will dissipate. over the next year.

Evans, one of the staunchest supporters of the central bank which remains aggressive in keeping its pledge to reach maximum jobs, also urged fellow policymakers to stick to and expand their new framework when This is to allow inflation to exceed the Fed’s average target of 2%. .

“In my opinion, to anchor long-term inflation expectations at 2%, we must be prepared to accept inflation reasonably above 2% during the expansion phase of a cycle to compensate for the underperformance that is occurring. would almost inevitably occur ”when the economy contracts, Evans mentioned.

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