MNI: Fed's George Says Taper Is First Step In Normalization

Kansas City Fed President Esther George said Friday that as prices appear set to remain higher for longer into next year the central bank's dual mandate goals may conflict, but tapering announced this week is a good first step in policy normalization.

"In most circumstances, the Federal Reserve's dual mandate objectives for maximum employment and stable prices are in alignment, so that the Fed's policy actions support both objectives simultaneously," she said. "There are however times when the objectives can appear to be in conflict. And now might be one of those times with inflation running well ahead of its longer-run average and labor markets appearing to have further room to recover."

George pointed to record unfilled job openings, wage growth and increased quits as signs of labor market tightness, but said that could prove temporary as workers rejoin the labor market and the childcare industry is restored.

Still, the Kansas City Fed president saw prices higher for longer and hitting American families.

"Disruptions that initially appeared to be temporary bottlenecks driving up prices now look as if they may be more long-lasting, with widespread reports suggesting that supply chains will not recover until well into 2022," she said in a speech at an energy conference. About half of an average household's expenditure basket is now experiencing "unusually higher prices," she said.