WASHINGTON: A few more strong jobs reports over the coming months would mark enough progress in the recovery from the pandemic to allow the US central bank to begin winding down its bond-buying programme, Federal Reserve Bank of Minneapolis President Neel Kashkari said.
“If we see a few more jobs reports like the one we just got, then I would feel comfortable saying yeah, we are - maybe haven’t completely filled the hole that we’ve been in - but we’ve made a lot of progress, and now, then will be the time to start tapering our asset purchases,” Mr Kashkari said in an interview with Joe Weisenthal and Tracy Alloway on Bloomberg’s Odd Lots podcast, recorded on Aug 9, report agencies.
Fed officials led by Chair Jerome Powell have said they will continue the purchases at the current pace until the economy has made “substantial further progress” toward their goals for employment and inflation, which many believe will be met in the coming months.
Those expectations were bolstered on Aug 6 by a strong Labor Department report on jobs for the month of July, which showed a second straight month of job creation in excess of 900,000 - bringing the total shortfall in headcount relative to pre-pandemic levels to around six million.
Mr Kashkari, since joining the Fed in 2016, has consistently been one of the central bank’s most dovish policy makers. In June, the last time Fed officials published projections for interest rates, he was one of five on the 18-strong Federal Open Market Committee who expected it would not be appropriate to begin raising rates before the end of 2023.
While the FOMC is only looking for “substantial further progress” toward full employment before it begins winding down its bond-buying programme, it has said it won’t begin raising rates before full employment is achieved.
According to Mr Kashkari, that may mean even higher levels of employment as a share of the population than prevailed immediately prior to the onset of the pandemic.
“I’m not convinced we were actually at maximum employment before the Covid shock hit us. So, that’s exactly why I want us to be really humble about declaring, ‘This is as good as it can get’,” he said.