The Federal Reserve Bank of San Francisco’s top official offered reassurances Wednesday that the Fed would continue its aggressive stimulus tools for as long as they’re needed to guide the nation’s economy through its uneven recovery.
John C. Williams, president and chief executive officer at the Federal Reserve Bank of San Francisco, repeated Federal Reserve Chairman Ben Bernanke’s statement made in June that the Fed could begin to reduce its purchase of securities later this year, eventually ending its asset purchase program around the middle of next year. Williams spoke at the Embassy Suites hotel in downtown Portland to dozens of business and banking leaders.
Williams emphasized that such an action would be based on “substantial improvement” in the economy, and said the unemployment rate remains a valid measure of economic improvement even though it overlooks people who have left the workforce.
The regional Federal Reserve leader estimated that the national unemployment rate, which was 7.4 percent in July, would drop to about 7 percent by the middle of next year. Even when it cuts its purchase of long term securities, Williams said the Fed would provide a continued economic stimulus by maintaining its low interest rate to banks for as long as the unemployment rate is above 6.5 percent. He estimated that the nation won’t reach that unemployment rate until the first half of 2015.
“I am convinced that our policies have been instrumental in reviving the economy and avoiding what could have been an economic meltdown,” Williams said, in a speech hosted by the Federal Reserve. “But the time is approaching when our economy will have enough momentum on its own without the need for additional monetary stimulus.”
This story will be updated.