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Fed bond-buying likely unchanged 'for quite some time,' Brainard says

01/13/2021 | 01:00pm EDT

WASHINGTON, Jan 13 (Reuters) - The Fed's current pace of bond-buying will likely remain in place "for quite some time" Fed Governor Lael Brainard said on Wednesday in remarks emphasizing how much progress still needs to be made for the U.S. central bank to achieve its inflation and employment goals.

The Fed "has stated clearly that it needs to see substantial further progress towards our goals before adjusting purchases. The economy is far away from our goals in terms of both employment and inflation and even under an optimistic outlook it will take time to achieve substantial further progress," Brainard said in prepared remarks to the Canadian Association for Business Economics.

Before any change is warranted in the Fed's current $120 billion in monthly asset purchases, "I will be looking for sustained improvements in realized and expected inflation and will examine a range of indicators to assess shortfalls from maximum employment," Brainard said.

The Fed's preferred measure of inflation as of November was at 1.4%, compared to its 2% target, Brainard noted, and the economy is still about 10 million jobs short of its pre-pandemic employment level.

Her remarks add the weight of an influential member of the central bank's Board of Governors to a debate that has attracted more-than-expected attention lately. Some Fed regional bank heads have suggested the rollout of coronavirus vaccinations could supercharge the economy in 2021 and warrant changes to the Fed's bond-buying later this year.

Along with the Fed's low benchmark overnight interest rate, which is expected to be on hold for a long time, the monthly bond-buying program aims to hold down borrowing costs for businesses and households.

Once the economy improves, the Fed intends to diminish the bond purchases before raising interest rates, making the debate over when to begin any "taper" of the monthly purchases a test of how fast it thinks the economy is improving. (Reporting by Howard Schneider Editing by Paul Simao)

ę Reuters 2021
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