June 13, 2024

The U.S. is close to a stimulus reduction but it could still take months through Reuters

3 min read
The U.S. is close to a stimulus reduction but it could still take months through Reuters
© Reuters. Federal Reserve de Richmond, Thomas Parkin 23/05/2019. Selectors / Ann Sabeer / File Photo


(Paragraph 3 edits “Tuesday” instead of “Monday”)

War Howard Schneider

Asheville, Reuters (Reuters) – Richmond Federal Reserve Chairman Thomas Parkin has said the U.S. labor market could take months to recover enough to reduce support for the Federal Reserve’s economy. Debate over when to cut $ 120 billion in monthly central bank bond purchases.

Many of Parkinson’s colleagues argued that purchases should be eliminated as soon as possible in order to bring monetary policy back to normalcy, and that they should be prepared for a potential interest rate hike as an interest rate against inflation and moderate asset and other price rises. Assets that increase through the purchase of Fed bonds.

In an interview with Reuters on Tuesday, Parkin, who is currently a member of the central bank’s monetary policy committee, acknowledged that the country is moving closer to the labor market growth that the central bank wants to see before reducing monthly purchases. Project.

“We’re getting closer … I do not know when that will happen. When we do, I’m very supportive of reducing and reversing a normal (monetary policy) environment as soon as the economy allows us,” Parkin told Reuters.

But he said he was not prepared to pick a timetable, arguing that the central bank should deliver on its promise: buy bonds until the job market is fully recovered.

You might think, “We’ll be there in the next few months,” Parkin said, as he spoke during a debate on the Fed, in which some of his colleagues called for a reduction in bond purchases in October.

“I like the normal contribution to the property markets and the normal (interest) rate,” Parkin said. But “as a team, I think when you come up with a guide, you think about it carefully and do what you can to live after that.”

The central bank said in December that it could expect “significant improvement” in job recovery before reducing property purchases, which could be a precursor to rising interest rates.

While others acknowledge concerns about financial stability or the need to be prepared for interest rate hikes, Parkin said he would focus on employment rather than the calendar as part of the arguments for early bond cuts.

In particular, he wants the employment and population ratio to rise by another half percent, to about 59%, and he sees a parameter as the “absolute” measure of the health of the labor market. This can be accomplished in a short period of time or take months to progress.

Park’s comments represent a middle ground that will help form any consensus that emerges about the central bank’s next steps. They also show differing opinions among federal officials about what data should be given prominence in planning to withdraw the limited emergency stimulus at the onset of the epidemic.

((Translation by Sao Paulo Newsroom, 55 11 56447723))


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