Esther George of the Fed says it’s time to start easing the juice of policies

Kansas City Fed Chairman Esther George told CNBC that the economy has reached the point where the central bank can begin withdrawing the monetary juice it has been providing.

First, the Fed will slow the pace of its monthly asset purchases in a process known as tapering. Although George did not set a specific date for when he believes this process should begin, he indicated that it will arrive soon.

“That I think is appropriate given the progress we’ve seen,” George told CNBC’s Steve Liesman in an interview aired Thursday on Squawk Box. “It doesn’t mean we’re going to move towards a neutral or narrower policy, but I think it’s a first step. The signs of the economy right now are showing that we’re getting to this point.”

Officials have set the standard for “substantial additional progress” as the point at which they will consider tightening monetary policy that includes benchmark interest rates that remain at zero.

George said progress in the labor market, as well as the sustained rise in inflation, show him that the Fed can begin to reverse the measures it has taken in the era of the crisis.

“When you look at the job gains we saw last month, the month before, look at the level of inflation right now, I think it would suggest that the level of accommodation we provide now is not necessary in this scenario,” she said. . “So I’d be willing to talk about taper sooner rather than later.”

George spoke as part of the Fed’s annual Jackson Hole conference, which hosts the Kansas City Fed. In a last-minute change, he chose to make the symposium virtual, as Covid-19 cases have increased in the region.

The conference usually produces major policy advances, and this year there will likely be substantial talk about volume reduction.

Reducing the $ 120 billion monthly minimum in bond purchases is the first step in the adjustment process; raising rates would come later.

Like other Fed officials, George said the question about rates will wait another day, as the Fed looks at the impact the eventual reduction will have and seeing the economic data as it moves forward. Some of the metrics have softened some in recent weeks, reflecting a possible slowdown in Covid-related impacts.

“Looking at all of these closely will obviously indicate when it’s time to adjust the rate,” said George, who indicated that a rise could be justified in late 2022.

He added that while the delta variant of the virus is very vigilant, he does not believe it will have a significant economic impact.

“Both the anecdotes I hear from our contacts in the region and the data so far do not show a material change in prospects,” George said.