March 5 (Reuters) - U.S. central bankers on Friday signaled
they do not plan to touch the dial on their super-easy policy
for some time, expressing little concern over the rapid rise in
U.S. Treasury yields in recent weeks, and hope for a robust
A drop in infections, accelerating vaccinations and likely
passage of a $1.9 trillion pandemic relief package have driven a
surge in bond yields. Some who worry about inflation have
speculated the Fed would act to bolster its current bond-buying
program to push down long-term borrowing costs.
Fed officials are not biting.
"If we were seeing a real uptick in real yields, that would
give me pause, that would give me concern that the amount of
accommodation we are providing to the economy is reducing, and
that might warrant us considering a policy response,"
Minneapolis Federal Reserve Bank President Neel Kashkari said.
"We are not seeing much movement in real yields" he added,
but rather an increase in what bond investors are demanding in
compensation to reflect rising inflation expectations.
St. Louis Fed President James Bullard agreed the Treasury
market moves do not require more Fed easing. "It's not matching
up right now that we need to be more dovish than we already
are," Bullard said in an interview on SiriusXM Radio.
The remarks from the Fed's arguably most-dovish policymakers
were in line with those of Fed Chair Jerome Powell, who on
Thursday said the current policy stance was appropriate, and
rejected concern that the recent rise in 10-year yields could
impede the Fed's work.
Under a new policy framework adopted last year, the Fed has
promised to keep rates at near-zero level until the economy
reaches full employment and inflation hits 2% and looks headed
above it. It is also buying $120 billion in bonds a month to
further pin down borrowing costs.
Bullard dismissed the need for the Fed to adjust those
purchases to cap the rise in yields. He said he would watch for
disorderly behavior in the Treasury market.
"Something panicky would catch my attention, but we're not
at that point," he said.
The 10-year U.S. Treasury note <US10YT=RR yield> - which
rose above 1.62% on Friday before falling back to about 1.58% -
is just returning to the level consistent with the six months
before the pandemic, Bullard said, a "still quite low level of
Bullard reiterated his recent forecast for the U.S. jobless
rate, now at 6.2%, to end the year at around 4.5%, and that
gross domestic product growth could be around 6.5%.
Nonetheless, he said, we "still need a lot of repair" in the
The Fed's policy-making panel next meets on March 16-17. Fed
rules prohibit policymakers from making public comments starting
Saturday in the runup to the meeting as they engage in intense
analysis of economic conditions, revise forecasts, and model
what they believe is the proper Fed response.
FAR TO GO
A U.S. government report Friday showing bigger-than-expected
job gains in February shows the recovery is headed in the right
direction, Cleveland Fed President Loretta Mester told CNN
International, but "we are still very far from our goals" of
full employment and price stability.
"To make sure that the post-vaccination recovery becomes
broad-based and sustainable...from my point of view on policy, I
think that's going to take sustained accommodation from the Fed
for some time," she said.
At a virtual event organized by Stanford University, Atlanta
Fed President Raphael Bostic made a similar point.
Were ready and able
to support the recovery as long and as
strongly as necessary," he said. We need to do all we can to
minimize the long term damage from the pandemic crisis and to
make sure that the recovery is as broad based and as inclusive
Asked if he agrees with his colleagues that there is no need
for the Fed to respond now to rising bond yields, Bostic said
high inflation is not a concern now but the Fed will keep
Inflation has not been a real stress point in terms of the
economic performance for quite a long time," Bostic said.
(Reporting by Ann Saphir;
Editing by Chizu Nomiyama, Andrea Ricci and David Gregorio)