Fed Hawks Want Further Tapering Despite Lackluster Jobs Report

(RTTNews) - Two of the more hawkish members of the Federal Reserve have made clear their wishes to further scale back the central bank's massive bond-buying plan.

In December, the Fed chose a modest taper of $10 billion to $75 billion per month in asset purchases. Philadelphia Fed President Charles Plosser and Richard Fisher of the Dallas Fed want continued reductions despite December's lackluster U.S. jobs data.

"I believe the economy has met the criteria of significant improvement in labor market conditions for ending the program and that further increases in the balance sheet are unlikely to provide appreciable benefits for recovery," Plosser said in the text of a speech prepared for delivery before an event in Philadelphia.

"I'm pleased that we've started to unwind. I'd prefer it to be a little faster. I don't think it's accomplishing very much," he later told reporters, according to Bloomberg.

Partly reflecting the impact of severe winter weather, the Labor Department released a report on Friday showing that employment in the U.S. increased by much less than expected in the month of December.

The report said non-farm payroll employment edged up by 74,000 jobs in December compared to economist estimates for an increase of about 200,000 jobs.

At the same time, the Labor Department said the U.S. unemployment rate dropped to 6.7 percent in December from 7.0 percent in November.

Plosser, who will be a voting member of the monetary policy setting Federal Open Market Committee this year, expects an improvement to 6.2 percent by year's end.

While he disagrees with some of his more dovish colleagues on the usefulness of the bond-buying plan, Plosser is with them on keeping the Fed's benchmark interest rate quite low for some time.

"There's certainly no rush to raise rates just because we get to (the Fed's target) 6.5 percent," he said.

Meanwhile, Dallas Fed President Fisher expressed concerns that the ultra-easy Fed policy is risking dangerous asset bubbles. He is convinced that unprecedented support measures should be scaled back even if it means a harsh reaction from Wall Street investors.

"Were a stock market correction to ensue while I have the vote, I would not flinch from supporting continued reductions in the size of our asset purchases as long as the real economy is growing, cyclical unemployment is declining and demand-driven deflation remains a small tail risk,'' Fisher said in remarks prepared for delivery to the National Association of Corporate Directors.

"I would vote for continued reductions in our asset purchases, with an eye toward eliminating them entirely at the earliest practicable date,'' said Fisher, also an FOMC voting this year.