Fed’s Bullard Wants Tapering Decision in September

President of the Federal Reserve Bank of St. Louis, James Bullard, believes the United States Federal Reserve should take a decision about tapering the massive asset purchases in September and begin the process during the first quarter of next year.

Bullard believes that monetary policymakers need to consider the possibility that inflation is more persistent than expected, disagreeing with the view reiterated by Fed Chair Jerome Powell that the surge in consumer prices is due to transitory factors, and acknowledging that the current policy is very dovish.

“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.”

“I would say that is a risky strategy to wait that long, you might have inflation running at an even higher level than you do today. I think you would get behind the curve. To me that is not the right risk management”

“You would have to raise the policy rate substantially to put downward pressure on inflation. That is the sense in which I think we are out of position.”

“They’ve been expecting it, and they don’t really think asset purchases are that effective in this environment.”

“Inflation is going to moderate, but we don’t know how much it’s going to moderate, and if it doesn’t moderate then we’re going to have to gently bring inflation back down to 2%.”