By Alister Bull
WASHINGTON, Oct 17 (Reuters) - The U.S. central bank shouldstart scaling back its bond-purchase program this month, KansasCity Federal Reserve President Esther George said on Thursday,repeating her view that the Fed ought to begin normalizingmonetary policy.
"I think to start that now would give us time to see how theeconomy reacts to that and not get behind in meeting ourresponsibilities," she told an event in Oklahoma City.
George is a voter on the Fed's policy-setting committee thisyear and has dissented at every meeting since January againstthe Fed's ultra-easy monetary policy, arguing that this couldstoke future inflation and undermine financial instability.
"This is likely to be a long process - in terms of unwindingan $85 billion dollar a month pace of accommodation - before weeven talk about raising interest rates," she said, underscoringher argument why the Fed cannot afford to delay any longer.
Many economists think the Fed will take no action at itsmeeting later this month because much of the economic data itrelies upon has been delayed by a 16-day shutdown of parts ofthe federal government. George didn't see things that way.
"We are missing a few pieces of data that we would normallyhave as a result of the government shutdown. But let me assureyou, we are still quite able to monitor and judge the economy'sprogress from other sources of information," she said.
Lawmakers voted on Wednesday to end the shutdown and raisethe U.S. debt limit, averting the threat of a destructivedefault.
George acknowledged that growth was tepid, probably aroundonly 2 percent in the second half of the year, but was moreoptimistic for 2014 and said the underlying tone was solid.
"To be sure this has been a slow recovery. But I am struckby the fact that it has been a resilient recovery...it has beenresilient in the face of some very strong headwinds," she said.
One of the other challenges facing policymakers in comingmonths is a change in leadership after President Barack Obamanominated Fed Vice Chair Janet Yellen to replace Ben Bernankewhen he steps down in January. George said this continuityshould be helpful for investor confidence.
"The fact that she has been inside the Fed, I think, will bereassuring to the markets that transition should be smootherthan if we brought in someone that was less well known to theFederal Reserve," she said.
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