Esther George, president of the Federal Reserve Bank of Kansas City, is on board with a “gradual” approach to unwinding trillions of dollars of economic stimulus — up to a point.
George said Monday that she and other Fed policymakers need to stay on their intended path to ensure that inflation doesn’t have a chance to grab hold of the economy.
“Inflation moves quickly,” George said after speaking to members of the Fairfax Industrial Association at the Kansas City Fed. “I don’t think you need to wait to see the whites of its eyes.”
The Fed has set a schedule for unwinding much of the $4.5 trillion it holds in mostly long-term Treasury bonds and securities backed by home mortgages. It scooped them up in three rounds of quantitative easing, or QE, in an effort to boost a sluggish recovery from the Great Recession and financial crisis.
James Bullard, president of the Federal Reserve Bank of St. Louis, also spoke Monday, suggesting that interest rates could stay put for now because even if the U.S. job market continues to improve, inflation isn’t likely to rise much.
“The current level of the policy rate is likely to remain appropriate over the near term,” St. Louis Fed President James Bullard told the America’s Cotton Marketing Cooperatives 2017 Conference in Nashville, Tenn.
That measure is forecast to rise only to 1.8 percent if the U.S. unemployment rate falls to an “unprecedented” 3 percent from the current 4.3 percent, Bullard said. With so little upward pressure on inflation, the Fed does not need to raise rates to slow growth, he said.