CNBC spoke with Esther George, Kansas City Fed President, about the fact that the economy is at a point where the central banking can reduce the amount of monetary support it provides.
The Fed will first reduce the pace at which it purchases assets monthly in a process called tapering. George didn't give a date, but she said that the Fed will begin this process soon.
George said that "that I believe is appropriate given our progress," in an interview with Steve Liesman on CNBC. This interview aired Thursday night on "Squawk box." It doesn't necessarily mean we will go all the way to tighter or neutral policy, but it is a first step. We are seeing signs in the economy that indicate that we have reached that point.
Officials have established the "substantial further Progress" standard as the level at which they will consider tightening their monetary policy, including benchmark interest rates being kept near zero.
George stated that George's progress in the job market and the steady rise of inflation are evidence that the Fed is able to reverse the crisis-era actions it took.
She stated that "When you compare the job gains last month and the month before, and you consider the inflation level right now, it would suggest to me that the level we're providing is likely not necessary in this scenario." "I would be open to discussing taper sooner than later," she said.
George spoke at the Fed's annual Jackson Hole Conference, which is hosted by the Kansas City Fed. She decided to make the symposium online in a last-minute change because Covid-19 cases had risen in the region.
This conference is known for producing significant policy developments. There will likely be a lot of talk about tapering at this year's conference.
The first step towards tightening is to reduce the minimum $120 billion per month in bond purchases; increasing rates would be next.
George shared the sentiments of other Fed officials and said that the rate question would be put off for another day while the Fed examines the effects of eventual tapering and looks at economic data as it develops. Recent weeks have seen some indicators soften, possibly reflecting a slowdown due to Covid-related effects.
George said that "watching all those closely obviously will signal when its time for a rate adjustment," and indicated that a hike could be justified in late-2022.
She said that although the delta virus of the virus is worth watching, she doesn't believe it has a significant economic impact.
George stated that "both the anecdotes and data I have heard from people in the region do not indicate a material shift in the outlook."
