Fed's Quarles sees long recovery, says he'll be 'more patient' on inflation

FILE PHOTO: Randal K. Quarles, vice chairman of the Federal Reserve Board of Governors, testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on "Oversight of Financial Regulators" on Capitol Hill in Washington, U.S., December 5, 2019. REUTERS/Erin Scott

(Reuters) - Federal Reserve Governor Randal Quarles on Wednesday painted a somewhat optimistic picture of a U.S. recovery powered by consumer spending, but said risks are weighted to the downside and the economy still needs further support.

Quarles, who is also the Fed’s vice president of supervision, was among the 8-2 majority at the U.S. central bank that last week voted to promise to keep interest rates low until the economy reaches full employment, and inflation has risen to 2% and is on track to moderately exceed that target for some time.

“Although we have seen the beginnings of a strong recovery, even optimistic forecasts suggest that it will take a long time to recover fully from this shock,” Quarles said in remarks prepared for delivery to the Institute of International Bankers. “By providing additional monetary policy accommodation through stronger, outcomes-based forward guidance, the (Fed) hopes to quicken the pace of the recovery.”

Quarles said he sees strong momentum in U.S. consumer spending, but job growth will likely slow and business spending is still uncertain. He noted that indicators of future inflation do not point to a rapid rise.

“I likely will be even more patient in reacting to small upward deviations, given the (Fed’s) move to focus on shortfalls of employment from maximum employment rather than deviations,” he said.

Reporting by Ann Saphir; Editing by Andrea Ricci