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Fed pigeons look to mid-summer to shed light on the economy by Reuters

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© Reuters. PHOTO PHOTO: Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, posed in an interview with Reuters at his office at the bank’s Minneapolis (Minnesota, USA) headquarters on January 10, 2020. REUTERS / Ann Saphir / File Photo

(Reuters) – Two of the most prominent U.S. central bank politicians said on Tuesday they hope to get more clarity on the post-pandemic economic outlook for next summer when the Federal Reserve expects to end asset purchases.

This clarity convinces us that interest rates should remain at the current level of zero for another year or more, or whether it encourages them to join half of the Fed’s political leaders who support more immediate rate hikes will depend on two main factors: suggested notes: inflation if it has started to fall as expected and if workers are returning to the workforce as they have long expected.

Neel Kashkari, chairman of the Federal Reserve Bank of Minneapolis, who in September asked the Fed’s sole policy maker to keep current rates at near zero at 2024, said Tuesday he remains “open-minded” in monetary policy.

As the recent rise of COVID-19 is disappearing in the United States, but is still shaking global economies, “these mixed signals are coming out of the economy,” Kashkari said at an event at the University of Wisconsin-Eau Claire.

Wages are rising, for example, but the U.S. economy supports 5 million to 7 million fewer jobs than would be expected if there were no COVID-19 crisis, and it has been a percentage of the population that is working or wants to work. It stood at 61.6%, well below previous pandemic levels, data show.

Inflation is well above the Fed’s 2% target, driven by factors that should be temporary – supply chain disruptions as well as rising demand as the economy reopens – but are proving to be lasting longer than previously thought, Kashkari said -k. .

“I’m hopeful we’ll get a lot more information in the next three, six, nine months,” and clarity on whether the millions left by the pandemic worker will return, he said. If they don’t, “this will give me more concern to sustain the high inflation readings we are seeing.”

Earlier Tuesday, Mary Daly, president of the Federal Reserve Bank of San Francisco, also set her own clock for mid-2022, telling a virtual meeting of the National Association of Business Economists: “Let’s be patient” with the policy and wait for the pandemic to disappear. he hopes.

Rising interest rates too early, he said, will do little to reduce prices, but will “absolutely” reduce the pace of employment gains.

“That’s too much of a risk when we have no indication that the current trends are sustainable,” he said.

“I’m looking forward to the summer of 2022, to hit wood, more variants, no more delta rises – to clarify” whether inflation will last after the pandemic and whether the job supply is really tight. many employers say so, or that higher wages and a better public health environment will get more people back into the job market.

In the meantime it could be a “difficult time” because consumers have to pay more for petrol and food and other necessities, he said.

On Monday, Chicago Faith President Charles Evans, who is also inclined to dovish, said he also believes inflation, in particular, is caused by a shortage of supply associated with COVID-19, which is set to disappear. But he said he’s less confident than he was three or four months ago, and he seems to have set a faster schedule to prove his hopes.

“We’ll know a lot more about this by spring, and if I still make the same excuses, the boy would be better off having a very good excuse, because he won’t be heard very well,” he told reporters.



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