Decreased Unemployment Rate: Fed President Recommends Taper

Federal Reserve

The Federal Reserve policymakers have been debating the U.S. bond-buying program for a while and may choose to begin reducing it sometime in the next few months from it’s current level of $85 billion. Fed President Charles Plosser told CNBC Friday that while he doesn’t like to get too excited over a single month’s numbers, November’s job report was a good indicator of the U.S.’s economic improvement.

“It’s pretty positive clearly. We continue to make solid progress,” said Plosser to CNBC, referring to the decline of unemployment, from 7.3 percent unemployment in October to 7.0 percent in November. As such, he notes that it may be a good point in time to “gracefully exit” quantitative easing.

“It is in a good direction,” said Plosser in the interview, “You’ve got a pretty stable positive rate of growth in jobs right now.” Plosser told CNBC that he’s believes leaving the bond purchasing program behind would be a smart move. “I don’t think it’s doing very much good for us. It has a lot of unintended consequences and risk for the economy down the road.”

“I think we need to go back to where we were in the earlier rounds of QE [Quantitative Easing] where we set a total amount … bought that purchase and then we stopped. Then we re-evaluated to whether or not we should go on,” Plosser told CNBC.

Dennis Lockhart of the Federal Reserve in Atlanta insisted that whenever the time came to “wind down asset purchases,” a timeline should be created to maintain economic confidence. “I favor providing the public as much clarity and certainty as possible about how the change will be executed,” Lockhart stressed. He still has his doubts about the taper’s timing, and thinks that the Fed needs to be certain about the economic improvements before changing policy. Both Lockhart and Plosser are non-voting members this year in the Fed.

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