A Federal Reserve official has called for a debate on the sale of central bank assets if the US continues to hold steam, a recent sign that the Fed is planning to reduce its financial support.
Randal Quarles, vice-chairman of the Fed, on Wednesday said he believed that even if he “cut small items”, the increase in US inflation since December “would be enough” to justify a decline in consumer spending by the end of 2021.
However, the labor market continues to evolve, he said in a speech to the Hutchins Center on Fiscal and Monetary Policy at Brookings Institution, a think tank.
“If my expectations for economic growth, employment, and inflation in the coming months are met. . . and especially if they come stronger than I expected. . . it will be necessary for [Federal Open Market Committee] to begin discussions on our purchasing plans for the coming meetings, “Quarles said.
“In particular, we need to connect with other people on what is going on since then December our broad and inclusive interpretation of many works, ”he added.
Quarles is not the only senior official in the Fed to signal the readiness of the central bank to start considering a reduction in monetary policy if the economy continues to grow. This represents a change from the central bank that any negotiations regarding the purchase of goods did not take place immediately.
“There will be a time for the next meetings, we will be where we can start discussions about reducing the return on purchases,” Richard Clarida, who is also the Fed’s deputy, told Yahoo Finance. “It depends on the amount of material we find.”
San Francisco Fed President Mary Daly has also confirmed that the central bank has begun addressing the issue of photography. “We’re just talking about photography, and that’s what you want from us,” he told CNBC on Tuesday. “You want people to see you for a long time.”
Quarles said the talks on reducing the financial implications of the Fed during the epidemic were a matter of “risk management”.
“The best analysis we have is that inflation is higher than we want it to be. But we at FOMC are financial experts and lawyers, not prophets, truth seekers and revelers. We can make mistakes, and what happens next? ”He said.
“Another part of the calculation for measuring the risk of overspending or overspending of our 2% target is that the Fed has a mechanism to address high inflation, while it is difficult to raise inflation that is not really consistent.”
During the question-and-answer session, Quarles added: “If we changed our monetary policy at 6% inflation, it would be different. We have the wrong chat room here.”
The Fed’s favorite currency, the main PCE, currently stands at 1.8%, and as part of its new strategy unveiled last August, it is committed to maintaining its resilience until it recovers.
Although he emphasized the need for the Fed to negotiate a reduction in inflation, Quarles said the central bank should be “patient” in the face of temporary inflation, as long as waiting it was “in harmony” with his goals. Any talk of rising interest rates on the Fed was “in the future”, he added.