As economic activity bounces back and the labor market continues to improve, RSM Chief Economist Joe Brusuelas told Yahoo Finance Live the U.S. economy is “entering boomtown.”
“I think we're about to pivot from recovery to expansion in the economy,” Brusuelas said. “It's appropriate that members of the Federal Reserve begin to signal to markets that things are not going to be the same forever. It's appropriate [for the Fed] to begin to think about tapering the pace of asset purchases… or altering the composition of those asset purchases”
Over the last several weeks, a number of Federal Reserve policymakers have signaled a willingness to start talking about scaling back the central bank’s bond purchases, which is currently about $40 billion of mortgage-backed securities and $80 billion of Treasuries per month. Dallas Fed President Robert Kaplan, Philadelphia Fed President Patrick Harker and Fed Governor Randal Quarles are among Fed officials who have expressed interest in soon starting to think about tapering.
And calls from investors for the Fed to revise its easy monetary policy are growing louder as well, after recent CPI data showed inflation is on the rise. U.S. inflation soared to a 13-year high in April, as the core personal consumption expenditures (PCE) price index, excluding food and energy, rose 3.1%.
But despite higher inflation and an improving economy, Federal Reserve Bank of New York President John Williams told Yahoo Finance Live in an exclusive interview Thursday that the economy is “still quite a ways off from maintaining substantial further progress.”
“I think we should be thinking through all of the issues around the economic recovery and thinking about policy options in the future. I just don't think the time is now to take any action,” WIlliams said.
The labor market is one area of the economy where a recovery is far from complete. While the pace of hiring picked up in May, the number of employed workers is still down about 8 million from pre-pandemic levels, with nearly 10 million Americans available for work.
That will take some time to work out, cautioned Brusuelas, and as a result, the central bank can “afford to be patient.”
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“I don't think we're going to be running up against any significant inflationary pressures because we really need to see three things: a huge [pickup in] hiring, demand-pull inflation from wages, and changes in inflation expectations. None of those three are really in the cards right now so the central bank has time to be patient, to observe where we're going in terms of expansion and how long they expect it to be before we're back to full employment.”
The Federal Reserve’s next policy-setting meeting is scheduled for June 15-16.
Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith