Federal Reserve Bank of San Francisco President John Williams, who has never dissented from a policy decision, said global coordinated communication will be needed as policymakers try to wind down stimulus in the world’s largest economy.
“We need to focus on our goals of getting the economy back to maximum employment, keeping inflation near 2 percent,” Williams, who doesn’t hold a vote on policy this year, said on a panel in Gothenburg, Sweden.
“We also need to communicate very effectively with other central banks around the world what our plans are so that there’s a good understanding of how policy in the U.S. is likely to proceed. That will help avoid at least somewhat the risks of big market turmoil.”
The yield on the benchmark 10-year Treasury note hit a two-year high of 2.93 percent last week on speculation the Federal Open Market Committee will soon begin tapering $85 billion in monthly bond buying. Policymakers, scheduled to meet Sept. 17-18, have pledged to keep buying securities until the job market improves substantially.
Minutes of the FOMC’s July 30-31 meeting released last week show policymakers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to reduce purchases this year if the economy strengthens, with a few saying a reduction may be needed soon.
Williams spoke at the University of Gothenburg at an annual gathering of the European Economic Association and the Econometric Society. European Central Bank Executive Board member Benoit Coeure and Lars Svensson, a former deputy governor at Sweden’s Riksbank, also spoke on the panel, titled “Challenges For Monetary Policy: Views From The Trenches.”
Williams said last week he is keeping an “open mind” about whether the central bank should reduce the pace of asset purchases at next month’s meeting.
“If the data continue to progress as we’ve seen, then I do agree that we should edge down or taper our purchases later this year,” Williams said in a Bloomberg Television interview Aug. 23 at the Fed’s annual meeting of central bankers and economists in Jackson Hole, Wyoming.
Speculation over tapering of the Fed’s quantitative easing may have helped eliminate some “froth” in the bond market as it pushed up Treasury yields, Williams said to CNBC the same day.
Payroll growth during the past six months has averaged 200,000, compared with a 141,000 average in the six months before September, when the FOMC announced a third round of bond buying. Also, jobless claims fell to 320,000 in the week ended Aug. 10, the least since October 2007.
The U.S. economy grew at a 1.7 percent annualized rate in the second quarter after a 1.1 percent gain the prior three months, Commerce Department data show. That’s below the 2.2 percent average since the recession ended June 2009.
U.S. economic growth will probably speed up in the second half of 2013, climbing 2.3 percent this quarter and 2.6 percent in the fourth quarter, according to the median estimate in a Bloomberg survey of economists from Aug. 2 until Aug. 6.
The yield on the 10-year Treasury note fell Monday three basis points, or 0.03 percentage point, to 2.79 percent in New York, according to Bloomberg Bond Trader prices.
Williams, 51, has worked in the Fed system since 1994. He was the reserve bank’s research director before succeeding Janet Yellen as president in 2011, when she became the board’s vice chairman.
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