Fed’s George Backs Reducing Bond Holdings by Central Bank

April 18, 2017 Share Print 0

Another Federal Reserve policymaker on Tuesday backed an emerging U.S. central bank plan to begin trimming its bond holdings later this year, as Kansas City Fed President Esther George warned against waiting too long in order to “overheat” labor markets.

George, a hawkish official who has urged the Fed to hike interest rates, said in a speech the U.S. economy was on “solid footing” with positive surprises more likely than negative ones.

George’s support of a prompt and gradual process of paring some of the central bank’s $4.5 trillion in assets puts her in the majority of colleagues at the Fed. She added that it should be done “on autopilot,” and not adjusted in reaction to short-term economic data, and that there may be “some tradeoff” with the Fed’s parallel plan to raise rates about three times per year.

“I would support beginning the process of reducing the balance sheet this year,” said George, who does not vote on monetary policy until 2019 under a rotation.

“I do not favor prolonging action for the purpose of allowing inflation to overshoot the 2 percent goal or to press labor markets into a condition where they are overheating,” she said at the Levy Economics Institute of Bard College.

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.