August 27, 2021
In an interview with Bloomberg TV, St. Louis Fed President James Bullard said that the Fed should start phasing out asset purchases and finish early next year to have more flexibility to address inflation if it is an issue in 2022. He spoke before the start of the Kansas City Fed’s annual Jackson Hole Economic Symposium, which is taking place virtually for a second year.
Bullard said he would like to see the Fed start tapering asset purchases now and finish the taper by the end of the first quarter of 2022. By that time, there will be many more jobs reports, which look like they’ll be strong to varying degrees, and the Fed could assess in the first half of the year whether inflation is moderating, he said. “If it’s moderating, then we’re in great shape. And if it’s not moderating, then we might have to be more aggressive,” he said.
Optionality has a lot of value right now, but the asset purchases don’t, so the tradeoff seems right, he said. “Let’s phase out the purchases, and let’s give ourselves some breathing room in 2022,” Bullard said.
In the interview, Bullard also spoke about the Fed’s new monetary policy framework, the tight jobs market, the possibility that the economy is moving into high productivity growth and the markets’ view on tapering.
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