Federal Reserve Bank of Kansas City President Esther George indicated that the size of the initial tapering (reduction of the Fed's asset purchase program) may be irrelevant, but warned that delaying its start may have costs.
George is the foremost monetary policy hawk with voting rights on the Federal Open Market Committee (FOMC) and has dissented at every meeting this year. At the most recent September 18th meeting, George voted against the policy action because she was "concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations," according to the FOMC statement.
Speaking at a Colorado Economic Forum on Thursday, George noted her disagreement with Fed colleagues. "My preferred course of action would have been to begin tapering asset purchases at last week's meeting," she said.
She reminded listeners that tapering is simply a slowing down of the extraordinary measures and should not in itself be considered a tightening of monetary policy. "Delaying action not only allows potential costs to grow; it also has the potential to threaten the credibility and predictability of future monetary-policy actions," she warned.
George also explained that winding down unconventional measures was justified given the current state of the economy. "An initial reduction in the pace of its sizable asset purchases would be appropriate given the ongoing improvement in economic conditions," she said.
However, George seemed unconcerned about the actual size of the first reduction. "I don't know that the initial amount really matters in the context of its impact," she said, though she stressed that "what is important, though, is that we will have to be clear, once we start, on where we will be going with the end of the program."
Source: LiveCharts
George is the foremost monetary policy hawk with voting rights on the Federal Open Market Committee (FOMC) and has dissented at every meeting this year. At the most recent September 18th meeting, George voted against the policy action because she was "concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations," according to the FOMC statement.
Speaking at a Colorado Economic Forum on Thursday, George noted her disagreement with Fed colleagues. "My preferred course of action would have been to begin tapering asset purchases at last week's meeting," she said.
She reminded listeners that tapering is simply a slowing down of the extraordinary measures and should not in itself be considered a tightening of monetary policy. "Delaying action not only allows potential costs to grow; it also has the potential to threaten the credibility and predictability of future monetary-policy actions," she warned.
George also explained that winding down unconventional measures was justified given the current state of the economy. "An initial reduction in the pace of its sizable asset purchases would be appropriate given the ongoing improvement in economic conditions," she said.
However, George seemed unconcerned about the actual size of the first reduction. "I don't know that the initial amount really matters in the context of its impact," she said, though she stressed that "what is important, though, is that we will have to be clear, once we start, on where we will be going with the end of the program."
Source: LiveCharts
