Salient to Investors:
John Williams at FRB of San Francisco said:
- Any move to reduce the pace of the Fed’s bond buying could be followed by an increase should the economy weaken again – this is uncharted territory.
- The Fed could begin slowing its purchases as early as this summer and end the program late this year should the economy performing as hoped and planned – like more good signs of improvement among a broad set of indicators including the unemployment rate, private payroll growth, unemployment claims, and the rate at which people quit their jobs.
- The more likely scenario is for a reduction in the pace of bond-buying, but there is leeway to buy bonds at a rate even greater than the current $85 billion.
Williams and James Bullard at FRB St. Louis believe the recent slowdown in inflation may complicate the Fed’s decision to moderate and end the bond purchases. Williams said the slowdown is temporary and prices will soon rise at a rate closer to the Fed’s 2 percent goal.
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