Fed Bullard says bond purchases should be scaled back quickly in case interest rates need to be raised

Federal Reserve Chairman of St. Louis James Pollard On Tuesday, he called on the central bank to be aggressive as it begins ending its monthly bond-buying program in case inflation becomes a bigger problem.

In an interview with CNBC, the Fed official said he believes there is a 50-50 chance that current inflation pressures are temporary, so policy makers should be prepared.

The Federal Reserve is It is highly expected to announce Next month, it will begin reducing the minimum asset purchase program of $120 billion per month, with a target date likely set by mid-2022.

Pollard said he’d like to see faster movement.

He said in “I support the start of the gradual gradual in November”closing bell. this epidemic.”

Federal Reserve officials say they prefer to finish tapering off before starting to raise rates.

The announcements come on the same day that The International Monetary Fund has warned that inflation It can last longer than expected. In doing so, the IMF has advised central banks to make contingency plans to tighten policy if that is the case.

Bullard said he’s optimistic that the economy will grow strongly this year into next, although he joined fellow policymakers in lowering US economic growth forecasts for 2021.

The Fed stressed that even if it starts tapering off this year, that should not be taken as a sign of looming interest rate hikes. Officials said they believe the Fed has fulfilled its inflation mandate of 2% growth, but is still far from its goal of full and comprehensive employment that would lead to higher interest rates.

“There is no reason for us to commit one way or the other at this point,” Pollard said. “I just want to be in a position to move in sooner so we can do it next year in the spring or summer if we have to do it.”

Some of the Fed’s more hawkish members – those who favor hawkish policy – have raised questions about The Fed’s narrative that inflation is temporary. Earlier in the day, Atlanta Fed President Rafael Bostic said he didn’t even want his office workers to use the term, preferring instead “occasional” to describe current conditions.

Pollard also cast doubt on the theory that the rate of inflation is primarily caused by supply chain problems.

“A supply shock alone cannot cause inflation,” he said. “A supply shock that is absorbed by very easy monetary policy, it is these two things that lead to inflation.”

However, he said he believes the US economy is in good shape and does not think it is experiencing stagflation similar to the 1970s, or inflation with negative growth.

“The probability of a recession is exceptionally low at this point,” he said.

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