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The U.S. labor market has not yet recovered sufficiently to warrant a cut to the central bank’s stimulus package during a pandemic, but a cut may be appropriate later this year, a senior Reserve official said on Wednesday. federal.
In remarks at St Lawrence University, New York Fed Chairman John Williams highlighted the risks to the economic outlook posed by the more virulent variant of the Delta coronavirus, but said he expected enough “significant” job gains this year to pave the way for the central bank to soon begin to withdraw its pandemic-era stimulus.
Fed pledged to buy $ 120 billion worth of treasury bills and agency mortgage-backed securities each month until it sees “further substantial progress” on inflation targets 2% on average and maximum employment.
Williams said on Wednesday that the Fed had met the first target and said that while there had been “very good progress” on the second, he wanted to see “more improvements” on the labor market front before moving. declare it reached.
âAssuming the economy continues to improve as I anticipate, it might be appropriate to start reducing the pace of asset purchases this year,â he said. âWhile the demand for workers and progress in hiring remains strong, I am confident that we will continue to see significant job gains and continued progress towards maximum employment. “
Williams warned of potential setbacks, however, especially if the pandemic continues to weigh on business activity.
âReopening the economy means more jobs, more demand for products and good momentum towards full recovery,â he said. “But, even with the strong growth rate that we are seeing, a full recovery of the pandemic will take some time.”
He added: âFor the remainder of the year, the most recent data indicates that the spread of the Delta variant is weighing on consumer spending and employment, and the pace of growth appears to be slowing down somewhat from the first. half.”
Inflation-adjusted gross domestic product is expected to increase by about 6% this year, Williams said.