Federal Reserve Bank of Cleveland President Sandra Pianalto said there has been “meaningful improvement” in the labor market and that a tapering of the central bank’s bond-buying program could be warranted if it continues to strengthen.
“Employment growth has been stronger than I was expecting, and the unemployment rate today is more than half a percent lower than I projected it to be last September,” Pianalto told an audience Wednesday in Cleveland. “In light of this progress, and if the labor market remains on the stronger path that it has followed since last fall, then I would be prepared to scale back the monthly pace of asset purchases.”
Fed policy makers are weighing whether the economy has improved enough to warrant scaling back their stimulus.
Chairman Ben Bernanke said in June that the Fed might trim its $85 billion in monthly bond buying this year and halt it around mid-2014 if economic performance improves as policy makers expect.
The economy added the fewest jobs in four months in July, even as the unemployment rate fell to 7.4 percent, Labor Department figures showed in a report last week. Joblessness has fallen from a peak of 10 percent in October 2009.
“The pace of recovery in the labor market has picked up” and “I take these recent improvements in the labor market as evidence that the economy is on firmer footing,” said Pianalto, who doesn’t vote on monetary policy this year but will be a voting member next year as part of a regular rotation.
Chicago Fed President Charles Evans, among the most vocal proponents of record monetary accommodation, said on Tuesday that there has been a “good improvement” in the labor market and indicated that a tapering of the central bank’s bond purchases in September is possible.
“This is not to say that the labor market is fully recovered; it is not,” said Pianalto, who hasn’t dissented from a Federal Open Market Committee decision since becoming the Cleveland district president in 2003. “So even when the asset purchase program is scaled back, the Federal Reserve will remain committed to supporting employment growth and price stability.”