WASHINGTON, May 14 (Xinhua) -- The U.S. Federal Reserve is still several months away from considering tapering its asset purchase program despite inflation pressures in the near term, Fed officials and analysts said.
"We need to see several more months of data before we get a clear picture of whether we have made substantial progress towards our dual mandate goals," Fed governor Christopher Waller said Thursday at the Global Interdependence Center's annual conference.
"Now is the time we need to be patient, steely-eyed central bankers, and not be head-faked by temporary data surprises," Waller said, expecting the Fed to maintain an accommodative policy for some time.
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."
While the Fed doesn't give the definition of "substantial further progress", many Fed officials believed that the central bank needs to see more improvement in the labor market before confirming that such progress has been made.
"I need to see more improvement before I would consider the conditions of our forward guidance on asset purchases as being met," Loretta Mester, president of the Federal Reserve Bank of Cleveland, said last week.
U.S. employment remains about 8 million jobs below its level in February last year and the unemployment rate is 2.5 percentage points above its pre-pandemic level, Mester noted.
The weak U.S. jobs report in April also underscores the value of the Fed's patient policy approach to achieve the central bank's inflation and employment goals, according to Fed governor Lael Brainard.
"As the economy reopens fully and the recovery gathers momentum, it will be important to remain patiently focused on achieving the maximum-employment and inflation outcomes in our guidance," Brainard said on Tuesday.
U.S. employers added 266,000 jobs in April, far fewer than economists' estimates of 1 million new jobs, with the unemployment rate little changed at 6.1 percent, the Labor Department reported last week.
"The May and June jobs report may reveal that April was an outlier, but we need to see that first before we start thinking about adjusting our policy stance. We also need to see if the unusually high price pressures we saw in the April CPI report will persist in the months ahead," Waller said.
U.S. consumer prices in April rose 0.8 percent from the previous month and 4.2 percent from a year ago, the Labor Department reported Wednesday. It marked the largest 12-month growth since a 4.9-percent increase for the period ending September 2008.
While inflation has transpired earlier and to a greater degree than expected, the Fed will remain patient to keep its ultra-loose monetary policy in place, according to Sarah House and Shannon Seery, economists at Wells Fargo Securities.
"The Fed will wish to see how the dust settles on inflation and inflation expectations before reacting to this unique confluence of events," the economists wrote Wednesday in an analysis, adding the Fed's most immediate concern remains the labor market and limiting scarring.
"Since we share the Fed's view that the inflationary pressures seen in April will ultimately prove temporary, the (CPI) report does not change our expectations that rate hikes are still likely a question for 2023," echoed Allison Boxer and Tiffany Wilding, economists at PIMCO, a global investment management firm.
However, the Fed is likely to announce that the central bank will begin tapering asset purchases before the end of the year as the U.S. economy recovers strongly from the pandemic, according to a survey of 49 economists released by Bloomberg last month.
About 45 percent of the economists expect the Fed to announce tapering in the fourth quarter while 14 percent see that happening in the third quarter, the survey showed. Enditem