Boston Federal Reserve Bank President Eric Rosengren said on Monday that one more month of strong job gains could satisfy the US central bank’s requirements for beginning to reduce its monthly asset purchases.
“We’ve had two months in a row where we’ve created more than 900,000 jobs and the unemployment rate dropped by half a percent to 5.4 percent,” Rosengren said during an interview with CNBC. “If we get another strong labor market report, I think that I would be supportive of announcing in September that we are ready to start the taper program.”
Fed officials said in December that they would continue purchasing assets at the current pace of $120 billion a month until there is “substantial further progress” toward the central bank’s goals for inflation and employment.
Rosengren said he believed the standard was already met for inflation, which is running slightly above the Fed’s 2 percent target. The policymaker repeated his view that he would support reducing the purchases of mortgage-backed securities and Treasury securities by equal amounts. He said the program should be completed by the middle of next year.
Rosengren, who will become a voting member of the Fed’s policy setting committee next year, said the economy is not yet at full employment, one of the criteria for raising interest rates from today’s near zero levels.
He also said that while he expects to see inflation above 2 percent next year, officials will have to wait to see if those forecasts turn out to be true.
Rosengren said the Delta variant of the coronavirus is unlikely to lead to the widespread shutdowns seen early on in the pandemic because many people are now vaccinated.
But it could be problematic if some people become nervous about traveling or going to restaurants – activities that contributed to employment growth in the service sector this summer, he said.
Meanwhile, the New York Federal Reserve said its barometer of manufacturing business activity in New York State declined more than expected in August as shipments growth nearly stalled and new orders grew at a much softer pace than a month earlier.
The regional Fed’s “Empire State” index on current business conditions fell around 25 points to 18.3, lower than a reading of 29.0 forecast by analysts polled by Reuters. The index had hit a record high of 43 in July.
