NY Fed's John Williams: US economy 'quite a ways off' from tapering asset purchases

Federal Reserve Bank of New York President John Williams said Thursday that he would like to see the U.S. economy make more progress before the central bank pulls back on its aggressive monetary stimulus.

“We’re still quite a ways off from maintaining the substantial further progress we’re really looking for in terms of adjustments to our asset purchase program,” Williams told Yahoo Finance in an exclusive interview.

But Williams added that the Fed should begin to be mindful of how the data looks in coming months.

“We have to be thinking ahead, planning ahead, so I do think it makes sense for us to be thinking through the various options we may have in the future,” Williams said.


In recent weeks, other Fed policymakers have said they would like to take the first steps toward slowing the central bank’s pace of quantitative easing, a program that is currently absorbing about $120 billion a month in U.S. Treasuries and agency mortgage-backed securities.

[Read the full transcript of Yahoo Finance Live's interview with New York Fed President John Williams.]

On Wednesday, Philadelphia Fed President Patrick Harker said “it may be time to at least think about thinking about tapering” the Fed’s asset purchase program. Dallas Fed President Robert Kaplan and Fed Governor Randal Quarles are among the other Fed officials who have similarly voiced their interest in having taper discussions sooner rather than later.

Inflation is already rising. The core personal consumption expenditures (PCE) price index, which excludes food and energy, was up 3.1%, the biggest jump in this index since 1992.

Williams said supply chain issues and shortages are behind the higher inflation readings, adding that he expects those factors to be “worked out over the coming months and quarters.”

He pointed to trimmed mean inflation readings from the Dallas Fed and Cleveland Fed, alternative measures that attempt to strain out the underlying inflation rates in the economy.

The bounce back is comparably slower in the labor market, where there are 8 million fewer workers compared to pre-pandemic levels.

The Labor Department is expected to release jobs data for the month of May Friday morning. Williams said he hopes to see a “strong” report but said achieving maximum employment will take more than one month of optimistic data.

Still, Williams said he was “very positive” about the economic outlook.

“I expect the economy will adapt to the rapid recovery and we’re going to see very good jobs growth and expect to see really strong GDP growth this year and seeing good growth next year,” Williams said.

Williams and his colleagues on the Federal Open Market Committee (FOMC) will begin their customary “blackout,” the roughly week-and-a-half period ahead of a policy meeting during which Fed officials do not make public remarks.

The central bank’s next policy announcement is expected June 16.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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