The Federal Reserve could start tapering its $85 billion-a-month asset-purchase plan by the summer, said John Williams, president of the Federal Reserve Bank of San Francisco on Wednesday.
When the Fed might begin tapering off quantitative easing has been a key question for markets since the Fed’s policy meeting in March, after Fed Chairman Ben Bernanke indicated that was the likeliest course of action.
The Fed has said it would continue the purchase program until it sees “substantial” improvement in the labor market.
“Assuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens we could start tapering our purchases then,” Williams said in a speech to a business group in Los Angeles.
“If all goes as hoped, we could end the purchase program sometime late this year,” Williams added.
This is clearest timetable put forward by a top Fed official.
Williams compared Fed policy to driving a car up a long, steep hill. The Fed is pushing down hard on the gas pedal but once the road gets flatter- the Fed “will have to lighten up on the accelerator a bit.”
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