Asset purchases not creating financial imbalances, Fed's Williams tells WSJ

A top US central bank official gave short shrift to the supposed need for the Federal Reserve to begin dialing back on its asset purchases.

In an interview with the Wall Street Journal, the head of the Federal Reserva Bank of New York, John Williams, said he did not believe that the Fed's aggressive purchases of government debt and mortgage bonds were feeding financial sector balances that would recommend tapering them.

"I don't take for granted, even with the good news we're seeing, that we’re going to get that full and robust recovery that we really want without really strong monetary policy support," he reportedly said.

Indeed, the central banker went on to add: "I think the effects will even be greater in the sense of supporting strong growth over the next few years, which is exactly what we need."

Notably, Williams also said the US economy had the wherewithal to grow by as much as 7.0% in 2021.

Even so, he added that "the data and conditions we are seeing now are not nearly enough for the [Federal Open Market Committee] to shift its monetary policy stance.

The Fed's current pace of asset purchases was running at $120.0bn each month.

The head of the San Francisco Fed echoed Williams' position.

In remarks to the Economic Club of Minnesota overnight, Mary Daly said the US economy was a "long way" from the Federal Reserve's objectives for inflation and employment.

"[...] when we are much closer to achieving our dual mandate goals than we are now... We have an optimistic outlook, a long way to go, and we are not out of the woods yet [...] we have only had a couple of months of really good data."