Rosengren: Fed should begin slowing stimulus efforts by fall

WASHINGTON (AP) — The president of the Federal Reserve Bank of Boston added his voice Monday to a growing number of people, inside and outside the Fed, who say the central bank should soon begin to dial back its extraordinary aid for an economy that is strongly recovering from the pandemic recession.

Eric Rosengren said in an interview with The Associated Press that the central bank should announce in September that it will begin reducing its $120 billion in purchases of Treasury and mortgage bonds “this fall." The bond buying, which the Fed initiated after the coronavirus erupted in March of last year, has been intended to lower longer-term interest rates and encourage borrowing and spending.

Rosengren also echoed some of the Fed’s recent critics by arguing that the bond purchases are no longer helping to create jobs but are instead mostly helping drive up the prices of interest-rate sensitive goods such as homes and cars. Home prices are rising at the fastest pace in nearly 20 years.

With inflation surging in recent months, the Fed has come under criticism from Republican members of Congress for continuing the bond purchases while also keeping its benchmark short-term interest rate pinned near zero. Last week, a Democratic senator, Joe Manchin of West Virginia, echoed that concern, urging Chair Jerome Powell to start tapering the bond buys.

Rosengren's suggested timetable for tapering is faster than most economists expect Powell to follow based on Powell's recent remarks that the job market needs to show further improvement. But like Rosengren, a number of other Fed policymakers have expressed support for a faster reduction in bond purchases. They include Christopher Waller, who serves on the Fed’s influential board in Washington, and James Bullard, president of the Federal Reserve Bank of St. Louis.

Other...