New York Fed head sees tapering later in 2021 if economy improves

New York Fed head sees tapering later in 2021 if economy improves

Labor market needs substantial progress before unwinding $120B monthly asset purchases, John Williams says

By Ovunc Kutlu

ANKARA (AA) - The Federal Reserve Bank of New York President John Williams said Wednesday the central bank's tapering -- a process to reduce accumulating new assets on its balance sheet -- will start later this year if the American economy continues to improve.

"There has been very good progress toward maximum employment," he said in a video address to St. Lawrence University students.

"But, I will want to see more improvement," said Williams, who is vice chairman and a permanent member of the Federal Open Market Committee (FOMC).

Williams stressed that the labor market needs to see "substantial further progress" that is necessary before the Fed can begin unwinding its $120 billion monthly asset purchase program.

Weak nonfarm payrolls data released last Friday showed the world's largest economy added just 235,000 jobs in August, much lower than the expected 750,000.

As a member of the FOMC, the group responsible for formulating US monetary policy, Williams' comments are seen as if he is unlikely to support a formal tapering announcement after the Fed's next policy meeting on Sept. 22.

The Fed's minutes from its July meeting showed that FOMC members discussed tapering, but were divided about when it would begin.

St. Louis Fed President James Bullard said earlier Wednesday that he supports the process to start later this year and end sometime in the first half of 2022.

The Fed has been buying $80 billion in Treasury notes and $40 billion in mortgage-backed securities each month since June 2020 to provide liquidity in the coronavirus-hit US economy and the markets.

The bank's current balance sheet recently climbed to around $8.4 trillion -- about twice the level reached at the beginning of the pandemic in March 2020.

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