August 26, 2021
St. Louis Fed President James Bullard discussed inflation, tapering the Fed’s asset purchases and his expectations for the U.S. economy during a CNBC interview.
Bullard pointed out that core PCE inflation is 3.5%, which is higher than expected as of last December. He said that he is a little skeptical that it will moderate in 2022.
“I think we’re going to get at least 2.5% inflation in 2022, maybe higher than that, and there’s some risk to the upside on that. So, for that reason, I think we want to get going on taper―get the taper finished by the end of the first quarter next year, and then we can evaluate what the situation is,” he said.
Asked whether the COVID-19 Delta variant should lessen his desire to taper, Bullard noted that the U.S. economy has learned to adapt to the pandemic. He cited national income that is higher today than before the pandemic, consumption that is above the pre-pandemic trend and an improving labor market. “Just a lot of reasons here to think about why we should start rolling back our emergency measures that we put in place in March and April of 2020,” he said.
During the appearance, Bullard also discussed the “incipient housing bubble,” the decline in real wages and his preference for allowing some assets to run off the Fed’s balance sheet as the FOMC gets to the end of the taper.Having trouble with the video? Watch it here.