“Most participants judged that the Committee’s standard of ‘substantial further progress’ toward the maximum-employment goal had not yet been met,” minutes of the Federal Open Market Committee’s July 27-28 gathering released in Washington Wednesday said. “At the same time, most participants remarked that this standard had been achieved with respect to the price stability goal.”
U.S. central bankers next meet September 21-22.
U.S. central bankers said in their statement last month that the economy “has made progress” toward their goals of sustainable 2 per cent inflation and maximum employment, a signal that it was still short of the “substantial” gains they are looking for.
Powell in his press conference following the July meeting said “the labor market has a ways to go,” a view expressed by several other officials since then.
Fed policy makers have differed publicly in the weeks since the meeting over when the central bank should start tapering with some, like Minneapolis Fed President Neel Kashkari wanting to a see a “few more” strong jobs reports and others such as Boston Fed President Eric Rosengren saying he’s open to announcing plans for a reduction at the next meeting if Septembers employment figures come in well.
St. Louis Fed President James Bullard said Wednesday that he would like to see the tapering of the asset-purchase program done by the first quarter of 2022.
Job gains have been strong, averaging 617,000 a month through July this year. The unemployment rate stood at 5.4 per cent last month, but broader measures still show slack.
The employment-to-population ratio for workers between 25 and 54 years old was 77.8 per cent last month compared to 80.5 per cent at the start of 2020, while Hispanic and Black unemployment rates remain high at 6.6 per cent and 8.2 per cent.
The recovery has been strong with both supply and demand imbalances pushing prices higher. The Fed’s inflation indicator rose at a 4 per cent pace for the 12 months ending June compared with the Fed’s 2 per cent target.
Fed officials cut their benchmark lending rate to zero in March 2020 and announced they would buy $200 billion of agency mortgage-backed securities and $500 billion of Treasuries to support market functioning. By December 2020, they realigned their guidance saying they would purchase $80 billion a month in Treasuries and $40 billion a month on mortgage securities “until substantial further progress has been made toward its maximum employment and price stability goals.”
The asset purchases have lowered longer-term interest rates and helped fuel a rise in housing prices and other financial assets, with one-month gains in home price indices breaking records while stock indices trade around record highs.