Fed's Brainard: Employment 'a bit short' of bar for taper, but may meet it 'soon'

US employment is "still a bit short of the mark" for the Federal Reserve to begin reducing its monthly bond purchases, Fed Governor Lael Brainard said on Monday in remarks prepared for a National Association for Business Economics conference.

Brainard is highlighting the risk that a resurgent pandemic may continue to thwart hiring into the fall.

Brainard, repeating language in the Fed's most recent policy statement, said she agreed that if hiring continues "as I hope," the economy "may soon meet the mark" that would warrant scaling back the Fed's $120 billion in monthly bond purchases.

Reuters has reported that she also ''cautioned that the slowdown in hiring seen in August could continue as the spread of the coronavirus Delta variant hits restaurants, travel and other parts of the economy.''

"Employment gains flatlined in August in the leisure and hospitality sector...As a result of Delta, the September labor report may be weaker and less informative of underlying economic momentum than I had hoped," Brainard said.

"We need to be humble about our ability to correctly anticipate future economic conditions given the unpredictability of the virus."

Market implications

US yields and the US dollar are making ground on Monday.

Last week, the Fed's chairman, Jerome Powell, cemented the prospects of a taper announcement to following in the coming months.

Fed chair Jerome Powell said after the conclusion of last week's meeting that the economy is one "decent" monthly jobs report short of meeting the threshold for tapering and will likely begin to do so in November.

The dollar index, DXY, which measures the US currency against six major rivals, rose 0.33% to 93.490 the high on the day so far. The US benchmark 10-year Treasury yields hit a three-month high of $1.515%.

The greenback has been bolstered by the rise in Treasury yields ahead of a slew of Federal Reserve speakers this week who were expected to reinforce expectations of the start of asset purchase tapering before the end of the year.

For the week ahead, Chair Jerome Powell will join Treasury Secretary Janet Yellen in speaking before Congress on Tuesday as a key event.