May 23, 2013 / 4:31 PM / in 5 years

Fed's Williams: No 'autopilot' by Fed if tapering starts - Bloomberg

(Reuters) - The Federal Reserve will maintain policy flexibility and respond to incoming economic data that theoretically could cause it to initially taper its pace of bond purchases and then adjust the purchases higher, the president of the San Francisco Fed, John Williams, said in an interview published by Bloomberg News on Thursday.

“Even if we do adjust downward our purchases, it doesn’t mean we’re now in some autopilot of moving in the same direction,” Williams told Bloomberg, which conducted the interview on Wednesday in San Francisco.

“You could even imagine a scenario where we adjust it downward based on good data and then adjust it back” if the economy weakened, he said.

Global share prices were rocked after Fed Chairman Ben Bernanke told Congress on Wednesday that the U.S. central bank’s bond purchases, now being conducted at an $85 billion monthly pace, could be scaled back in the next few of its regular policy meetings.

The Fed is scheduled to hold policy meetings over the next few months on June 18-19, July 30-31, and September 17-18.

Bernanke on Wednesday also said the Fed needed to see more signs of recovery in the U.S. economy before scaling back its stimulus. Investors, however, focused less on those comments.

Williams, who is not a voting member of the Fed’s policy-setting committee this year, emphasized the U.S. central bank would retain its flexibility and watch the incoming data.

“We can adjust it down some, watch how things progress from there, and then adjust it again one way or the other,” he said.

Reporting By Alister Bull; Editing by Leslie Adler

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