Cue the taper talk?
Federal Reserve Bank of St. Louis President James Bullard told reporters following a virtual speech that he wants to begin tapering the ultra-aggressive $120-billion-a-month quantitative easing program this fall and finish it by the end of March.
Bullard thinks this is necessary now that inflation is starting to heat up in the United States economy.
He is pushing for a decision to be made at the September Federal Open Market Committee (FOMC) policy meeting.
“My preference would be to get to a decision in September and start sometime after that,” Bullard said. “My main goal would be to get done by the end of the first quarter.”
“We should go ahead and get the taper going, get it behind us, so we would have some optionality to handle the possibility — maybe not even the likelihood — the possibility that inflation is more persistent and higher than we’d like,” he added.
With the FOMC waiting to begin tapering Treasury acquisitions later in 2022, Bullard believes it “is a risky strategy to wait that long,” making the Eccles Building “behind the curve.”
Fed Chair Jerome Powell has signaled that the central bank would only begin to tighten monetary policy once the U.S. economy is fully recovered from the pandemic-induced downturn. This includes an improved labor market.
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