By Howard Schneider

WASHINGTON, (Reuters) – Last December, COVID-19 vaccines were just starting and the pandemic still raging. The U.S. Federal Reserve pledged to continue support the recovery by purchasing $120 billion monthly bonds until it had made “substantial additional progress” towards its goals of 2% inflation, maximum employment, and continued support for the recovery.

On Wednesday, the central bank expects to announce that the November policy meeting has ended. This will allow the central bank to reduce $120 million in monthly bond purchasing and ultimately raise interest rates.

Is this a significant amount of progress?

The Fed probably got more inflation than they expected. At the time that the benchmark for “substantial additional progress” was established, the annual price increase rate was 1.3%. This was measured using the Fed’s Personal Consumption Expenditures price Index. Since May, it has increased by more than 4 percent.

(GRAPHIC: Inflation jumps – https://graphics.reuters.com/USA-FED/JOBS/gkplgxreevb/chart.png)

It has not been all bad in terms of the employment market.

The overall economy output has seen a slower recovery of employment than it did for the rest. While the gross domestic product has increased to a level that is higher than it was before the pandemic, jobs are still more than 3 percent below their pre-pandemic levels.

(GRAPHIC: Jobs lagging GDP Jobs lagging GDP – https://graphics.reuters.com/USA-FED/JOBGROWTH/xegpbzzrbpq/chart.png)

This is a positive development in one way. It means that there will be more workers producing goods and services.

It also shows a possible scare to people wanting to work, and, with the Fed’s recent commitment to inclusive recovery, to job growth that isn’t broadly shared.

Here’s the tricky part. The Fed declaring substantial additional progress is a judgement call.

At the time the Fed established the benchmark, there were about 10,000,000 fewer jobs than it had in February 2020 before the outbreak of the pandemic. Around half of those jobs has been restored.

(GRAPHIC: Substantial progress on jobs – https://graphics.reuters.com/USA-FED/JOBS/mopankjnlva/chart.png)

Although 5 million jobs are a large number, Fed officials believe that this is more due to workers being less selective about accepting positions. This issue Fed policy cannot address and not the insufficient demand for labor. According to the Fed, reducing bond buying means that there is enough demand for services and goods now.

However, it’s a more narrow view of the market than what Fed seems to have adopted when it started referring to maximum unemployment as a “broadly-based and inclusive goal.”

A number of indicators, such as the Black unemployment rate and women’s participation in the labour force, are still significantly lower than prior to the pandemic.

(GRAPHIC – “Substantial more progress” for Fed – https://graphics.reuters.com/USA-ECONOMY/FEDPROGRESS/yzdvxmmmdpx/chart.png)

The Fed may have made significant progress over the past year in a general sense. Now the Fed is debating whether more progress should be made to reach its goals. This includes jobs and keeping inflation in check.