Fed’s Williams Says 2021 Taper Start ‘Could Be Appropriate’

(Bloomberg) -- “It could be appropriate” for the U.S. central bank to begin tapering its bond-buying program before the year is out, Federal Reserve Bank of New York President John Williams said.

“Assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year,” Williams said Wednesday in remarks prepared for a virtual event. “I will be carefully assessing the incoming data on the labor market and what it means for the economic outlook, as well as assessing risks such as the effects of the delta variant.”

The Fed cut its benchmark interest rate to nearly zero and aggressively bought bonds last year at the onset of the coronavirus pandemic. It has said it will continue the purchases at the current pace of $120 billion per month until the economy has made “substantial further progress” toward its maximum employment and price stability goals, a marker many officials have said they believe will be achieved this year.

“I think it's clear that we have made substantial further progress on achieving our inflation goal,” Williams said. “There has also been very good progress toward maximum employment, but I will want to see more improvement before I am ready to declare the test of substantial further progress being met.”

Employers added just 235,000 Americans to payrolls in August, according to the monthly jobs report published Friday by the Labor Department. The weak hiring figure was well below what was expected by forecasters polled by Bloomberg, following two straight months of job creation closer to 1 million in June and July.

“Probably some of that is the delta variant having some effects, but it's hard to really know,” Williams said Wednesday while answering questions from reporters after the speech.

The New York Fed chief added that judging “substantial further progress” was ultimately about assessing cumulative job creation since December 2020, when that marker was laid out.

“Some months come in stronger. Some, not so strong,” he said. “It's really about the accumulation of that.”

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