Unemployment may not return to Trump lows: Fed official

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Fox Business 26 August, 2021 - 01:12pm 51 views

What is tapering in finance?

Taper refers to a post-crisis asset purchase plan, where the Fed, at a predetermined stated pace, starts to slowly and gradually decrease how many assets it's buying (the process of purchasing securities for stimulative purposes is commonly called quantitative easing, or Q.E. for short). Bankrate.comTaper, explained: How the Fed plans to slow its bond purchases without wrecking the economy

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Kansas City Federal Reserve President Esther George, in a wide-ranging exclusive interview, argued that tapering should happen 'sooner rather than later' and predicted 'high growth' for the U.S. economy this year.

The U.S. unemployment rate may not return to the more than half-century lows recorded under former President Donald Trump, according to Esther George, president of the Federal Reserve Bank of Kansas City.

The national unemployment rate is currently at 5.4%, a pandemic-era low, but remains elevated from the 3.5% that was reached under Trump. Many workers remain on the sidelines due to generous unemployment benefits, the closing of schools and day care, and fears over the virus. 

"I'm not necessarily wedded to saying a pre-pandemic number will represent full employment because one of the things we know is that the pandemic shock could have had real impacts on the way we work," George told FOX Business’ Edward Lawrence.  

The Federal Reserve’s dual mandate calls for the central bank to achieve maximum employment and price stability. However, the central bank last year said it would allow inflation to run above its 2% target "for some time" in order to achieve its employment objective. 

The Fed as recently as 2019 thought a 4.1% unemployment rate represented "full employment." 

That was until Trump’s tax cuts and deregulation helped the U.S. economy, before the pandemic, achieve its lowest unemployment rate since the 1950s. The policies helped achieve record low unemployment for Asians, Blacks and Hispanics. 

In April 2020, the unemployment rate skyrocketed to a record high of 14.8% as nonessential businesses were forced to close their doors in order to help slow the spread of COVID-19. 

Workers have been returning to the labor market amid a reopening of the economy, but policies put in place by the Biden administration have limited job gains. 

Biden extended the extra $300 per week in supplemental unemployment benefits until September, something Federal Reserve Chairman Jerome Powell admitted is having an impact on people returning to work.  

He said at his press conference on July 27 that the rolling off of "very generous unemployment benefits" and other factors should result in "strong job creation." 

Other Biden policies, like the president’s assault on the oil industry, are also impacting the labor market. 

Oil-producing states like Texas (6.2%), New Mexico (7.6%) and Alaska (6.6%) all have unemployment rates well above the 5.4% national average as Biden’s policies have limited production and increased reliance on OPEC. 

Those policies, and other factors, including the state of the reopening of schools and day care, the child tax credit, and proposed corporate tax hikes, could make it even more difficult for the Fed to achieve maximum employment as labor force participation is likely to remain uncertain. 

"I think we should aim for trying to get that unemployment rate as low as we can," George said. "It's hard right now, given the nature of the shop, to know what exactly that looks like."

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KC Fed president: US economy ready for tapering measures

Fox Business 27 August, 2021 - 01:50am

Fed's George says it's time to start tapering asset purchases

Fox Business 26 August, 2021 - 08:50am

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Kansas City Federal Reserve Bank President Esther George on the U.S. economy and tapering measures.

Though George did not mention specifics about tapering the Fed's $120 billion in monthly purchases Treasuries and mortgage-backed securities – including a start date or amounts – she suggested policymakers should begin sometime this year. 

"I'm less precise about amounts and dates, and really more focused on saying: Sooner rather than later," she told FOX Business' Edward Lawrence. "With a baseline outlook that suggests we're going to continue to see job gains, continue to see strong growth, it suggests we can begin to make some of those adjustments this year." 

For months, the U.S. central bank has been grappling with conflicting economic data – surging inflation but slower-than-expected job growth, coupled with the new threat posed by the highly contagious delta variant – and when to begin unwinding the ultra-easy monetary policies implemented to keep the economy afloat in March 2020.

The issue has been complicated by a sharp divergence of opinions among members of the Federal Open Market Committee; minutes from the Fed's July meeting show that while "most" officials are prepared to reduce the $120 billion in monthly asset purchases this year, others think it best to wait until 2022. 

George – who will be a voting member of the FOMC next year – is among the most hawkish Fed officials. She suggested that policymakers will provide further insight into reducing asset purchases during the Fed's September meeting, which ends on Sept. 22.

"That adjustment process, the conversation about that is already underway," she said. "I think the communication about that coming out of our September meeting will reflect the deliberations and the views of the committee on how that progress is being achieved." 

Her comments come during the Fed's annual economic symposium; while traditionally it's held in Jackson Hole, Wyoming, the gathering was switched to a virtual single-day meeting at the last minute due to concerns about the highly contagious delta variant.  

Chairman Jerome Powell is slated to deliver a keynote speech Friday morning, although investors expect the Fed head to steer clear of tapering details.

"We probably won’t get clarity on the timing, magnitude and roadmap on tapering that the market is craving," said Joe Brusuelas, RSM chief economist. "It’s been years since [Alan] Greenspan and [Ben] Bernanke utilized Jackson Hole to make major policy pronouncements that moved global financial markets."

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Fed's George says it's time to start tapering asset purchases

The Economist 26 August, 2021 - 08:50am

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Kansas City Federal Reserve Bank President Esther George on the U.S. economy and tapering measures.

Though George did not mention specifics about tapering the Fed's $120 billion in monthly purchases Treasuries and mortgage-backed securities – including a start date or amounts – she suggested policymakers should begin sometime this year. 

"I'm less precise about amounts and dates, and really more focused on saying: Sooner rather than later," she told FOX Business' Edward Lawrence. "With a baseline outlook that suggests we're going to continue to see job gains, continue to see strong growth, it suggests we can begin to make some of those adjustments this year." 

For months, the U.S. central bank has been grappling with conflicting economic data – surging inflation but slower-than-expected job growth, coupled with the new threat posed by the highly contagious delta variant – and when to begin unwinding the ultra-easy monetary policies implemented to keep the economy afloat in March 2020.

The issue has been complicated by a sharp divergence of opinions among members of the Federal Open Market Committee; minutes from the Fed's July meeting show that while "most" officials are prepared to reduce the $120 billion in monthly asset purchases this year, others think it best to wait until 2022. 

George – who will be a voting member of the FOMC next year – is among the most hawkish Fed officials. She suggested that policymakers will provide further insight into reducing asset purchases during the Fed's September meeting, which ends on Sept. 22.

"That adjustment process, the conversation about that is already underway," she said. "I think the communication about that coming out of our September meeting will reflect the deliberations and the views of the committee on how that progress is being achieved." 

Her comments come during the Fed's annual economic symposium; while traditionally it's held in Jackson Hole, Wyoming, the gathering was switched to a virtual single-day meeting at the last minute due to concerns about the highly contagious delta variant.  

Chairman Jerome Powell is slated to deliver a keynote speech Friday morning, although investors expect the Fed head to steer clear of tapering details.

"We probably won’t get clarity on the timing, magnitude and roadmap on tapering that the market is craving," said Joe Brusuelas, RSM chief economist. "It’s been years since [Alan] Greenspan and [Ben] Bernanke utilized Jackson Hole to make major policy pronouncements that moved global financial markets."

This material may not be published, broadcast, rewritten, or redistributed. ©2021 FOX News Network, LLC. All rights reserved. FAQ - New Privacy Policy

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