John Williams, President of the Federal Reserve Bank of New YorkIf the economy continues to improve as expected, the Fed may soon start to slow the pace of asset purchases, it said on Monday.
At a virtual event organized by the New York Economic Club, Mr Williams said it was clear that the Fed had made "substantial further progress" in its inflation target and "very good progress" in maximising employment. He was referring to the threshold set by policy makers to reduce central bank bond purchases from the current $120 billion a month.
"assuming the economy continues to improve as I expected, the pace of asset purchases may slow soon," Williams said, echoing a policy statement issued by central bankers after last week's meeting.
Some policymakers, including Cleveland Fed President Loretta Mays and Kansas City Fed President Esther George, say the criteria for scaling back bond purchases have been met, but some officials say they want to see job growth continue.
After last week's Fed meeting, Federal Reserve Chairman Colin Powell said that the threshold for reduction has not been reached and that the Fed may begin to scale back its bond purchases in November.
Mr Williams said he expected the economy to grow 5.5-6 per cent this year and inflation to fall back to 2 per cent next year.
He expects the US labor market to grow strongly in the coming year or so. While the benefits of financial aid are likely to fade as these programmes end, Mr Williams says savings accumulated by some households during the pandemic may help support consumer spending next year.
He said it would take some time for the US economy to meet the necessary requirements for the central bank to raise interest rates from near zero, indicating uncertainty about the outlook and the need for continued job growth.
"there is still a long way to go before employment is maximized," Williams said. "over time, it should become clearer whether we have sustained inflation of 2%."