With inflation below the Fed’s 2% goal, Bernanke is free to focus on the other half of the central bank’s mandate from Congress -- full employment, according to Ward McCarthy, chief financial economist at Jefferies LLC in New York and a former Fed economist. Prices rose 0.7% in April from a year earlier, according to the personal consumption expenditures index, the measure watched by the Fed.
“Inflation is the Rodney Dangerfield of the dual mandate,” McCarthy said. “If you generate strong job growth, that’s really fundamental to a stronger economy because over two-thirds of our economy is related to consumer spending.”
Evans last month said he’d like to see monthly employment growth of 200,000 or more for at least six months.
“If I had high confidence that this was going to be maintained over the next six months and beyond, I would be quite amenable to discussions about adjusting the flow of purchases downward,” Evans said May 20 in Chicago. In 2011, he dissented twice from FOMC decisions leaving policy unchanged because he favored adding stimulus.
Rosengren, in a May 29 speech in Minneapolis, said “significant accommodation remains appropriate at this time.” Responding to a question, he said he wants to see consistent monthly payrolls increases exceeding 200,000.
Stocks and Treasuries have declined since May 22, when Bernanke told the Joint Economic Committee of Congress that the Fed “could” scale back the pace of asset purchases in the “next few meetings” if the labor market improves and the Fed is convinced the gains are sustainable.
“If we see continued improvement and we have confidence that that is going to be sustained, then we could in -- in the next few meetings -- we could take a step down in our pace of purchases,” Bernanke, 59, said in response to a question.
The yield on the 10-year Treasury note rose as high as 2.17% from 1.93% the day before Bernanke spoke. It was 2.08% late yesterday. The Standard & Poor’s 500 Index has lost 2.8% since May 21.