Fed taper on the way as economy rebounds

by Ryan Smith09 Sep 2013

The Federal Reserve can begin scaling back its bond-buying program later this year as the economy strengthens, a Fed official said Friday.

Chicago Fed President Charles Evans, speaking at an event sponsored by AgFirst Farm Credit Bank, said the Fed would likely still need to hold down official interest rates at near zero for another two years, Reuters reported. He was also hesitant to say that the Fed would begin to taper in September, as many investors expect.

“I do expect, however, that the outlook will materialize in such a way that we’d likely reduce the (bond buying) rate starting later this year and subsequently wind down these purchases over a couple of stages,” Evans said. “For me, to start the wind-down, it will be best to have confidence that the incoming data show that economic growth gained traction during the third quarter of this year and that the transitory factors that we think have held down inflation really do turn out to be transitory.”

Evans said that the Fed should monitor prices to see that inflation, which is currently around 1.2%, moves closer to the government’s target of 2%.

"It could take a long time for us to return to our 2% inflation objective, and I will be monitoring our progress closely when making my decision about appropriate monetary policy," said Evans, who is a voting member this year on the Fed’s Federal Open Market Committee.


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