Kansas City Fed’s Esther George: ‘Time to begin’ tapering asset purchases

Federal Reserve Bank of Kansas City President Esther George is still advocating for the central bank to slow its stimulus starting next month, despite the rising cases of the Delta variant.

Ahead of the central bank’s Jackson Hole Economic Symposium set to take place Friday, George told Yahoo Finance that economic activity does not appear to be slowing down despite the fresh spike in COVID-19 cases nationally.

“That gives me some confidence in the outlook that we see, that we could continue to push through this,” George said in a taped interview Wednesday.

George said that momentum supports her call for the Fed to begin “tapering” its asset purchase program. Since the depths of the pandemic, the Fed has been snatching up about $120 billion a month in U.S. Treasuries and agency mortgage-backed securities, committing to maintaining at least that pace of purchases until the economy looks like it had made “substantial further progress.”

George said “strong job gains” and higher inflation readings point to an economy that, in her view, has already hit that mark.

“I think it is time to begin to ease back from the amount of accommodation that’s going into the economy given the outlook that we have, so I would be in favor of beginning that process sooner rather than later,” George said.

Although there are still 5.7 million fewer people on payrolls compared to pre-pandemic levels as of July, George said tapering will not be a “material issue” to the labor market recovery.

“That tapering process continues to provide some accommodation along the way, until it ends,” George said, pointing out that real (or inflation-adjusted) interest rates remain and will remain negative.

Those remarks set the stage for what could be a pivotal next policy-setting announcement on Sept. 22. Some of George’s colleagues, such as Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari, are in the camp of wanting to wait past September before announcing a taper.

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