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Labor market improvement needed for Fed tapering asset purchase: official

(Xinhua) 10:48, May 06, 2021

WASHINGTON, May 5 (Xinhua) -- More improvement in the U.S. labor market will be needed before the Federal Reserve's conditions for tapering its asset purchase program will be met, a senior U.S. Fed official said Wednesday.

"These (employment) indicators clearly show that things are moving in the right direction and progress has been made since December," Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in prepared remarks to the Boston Economic Club.

"But I need to see more improvement before I would consider the conditions of our forward guidance on asset purchases as being met," Mester said, noting U.S. employment remains about 8.5 million jobs below its level last February and the unemployment rate is 2.5 percentage points above its pre-pandemic level.

Mester expected the U.S. economy to enter "the post-vaccination phase of the recovery" in the third quarter of this year, as efforts to increase the distribution of vaccinations will continue over the next several months.

"In this phase, the recovery will broaden over time as those sectors that involve high physical contact see increases in activity," she said, adding monetary policy will "need to be very accommodative for some time" to support the broadening of the recovery.

Even after the Fed decides that the conditions for tapering have been met, the central bank will still be purchasing assets and monetary policy will remain highly accommodative, Mester noted.

The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until the economic recovery makes "substantial further progress".

At a press conference last week, Fed Chairman Jerome Powell told reporters that "it is not time yet" to start talking about tapering the central bank's asset purchase program as the U.S. economic recovery "remains uneven and far from complete".

(Web editor: Guo Wenrui, Liang Jun)

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