Summary of Today’s Fed Officials Remarks

As investors are closely monitoring developments in the U.S. monetary policy, the Federal Reserve is gradually preparing markets for the beginning of tapering and the move from easing towards policy normalization.

The first sign was when the Fed said that it would halt purchases of corporate bonds, then a clearer sign came in the July policy meeting minutes that showed most participants believe that scaling back the massive asset purchases should begin before the end of the year.

Today, Fed Chair Jerome Powell endorsed this direction, and although it is a step towards a cycle of policy tightening, he noted that increasing interest rates would not take place soon.

Powell was speaking at the Jackson Hole Economic Symposium, but other Fed officials also spoke during the annual conference or in TV interviews.

Mester

Cleveland Fed President Loretta Mester told Bloomberg TV that the September meeting will likely see planning the pace and timing of reducing asset purchases within a timeframe that will likely begin in November and end by the middle of next year. She noted that the economy no longer needs the current level of bond-buying while raising interest rates will come in a later stage. Mester also spoke about the risks of the spread of the Delta variant.

Kaplan

Dallas Fed President Robert Kaplan also told Bloomberg that tapering could be done over a period of eight months, separately from any decisions on interest rates. He also pointed to the rising inflation, expecting an average rate of 2.5% next year, as well as fears over persistent supply disruptions and labor shortages.

Bullard

Speaking to the same network, St. Louis Fed President James Bullard said that asset purchases are currently not providing much support to the economy, with an additional cost of contributing to rising housing prices.

Bullard also supports a move to combat inflation, which he claimed is easing, if it remained higher for a longer time.

Bostic

The Atlanta Fed President Raphael Bostic does not expect tapering will upset markets, telling CNBC that progress has been made on the employment front. Bostic also thinks that tapering should be done rapidly, explaining to Reuters that it could begin soon if the August jobs numbers were as strong as the past two months. He thinks the outlook for the economy did not change, but fears the Coronavirus Delta variant might affect it.

 Harker

Philadelphia Fed President Patrick Harker told Yahoo Finance that he sees further improvements in the jobs market in the coming months, with further progress on the road to recovery, especially as more people are vaccinated. However, he did point to market expectations that supply chain bottlenecks might last longer than previously expected.

Harker also told CNBC that asset purchases are no longer needed as before, and despite progress towards the inflation target, high inflationary pressures might last longer than expected, noting that the central bank cannot do much to address the supply constraints. The Philly Fed president also said raising interest rates should wait until tapering is finished and in consideration to economic indicators.