Two members of the Federal Reserve warn that the ‘tapering’ is near
Two members of the Federal Reserve have already warned that the ‘tapering’ or gradual withdrawal of the economic stimulus approved to tackle the economic crisis generated by Covid is close.
Both have influenced in the last hours that the world’s leading economy is growing rapidly and that, despite the fact that the labor market still has room to improve, inflation is already at a level that could be key to mark the beginning of rate hikes.
They have been specifically, and according to Reuters reports, the president of the Federal Reserve Bank of Atlanta, Raphael Bostic, and that of the Richmond Fed, Tom Barkin. The first (who has a vote) sees in the fourth quarter the time to start reducing the purchase of bonds, although he is open to starting that de-escalation even earlier if the labor market maintains its recent rate of improvement.
Both he and Barkin argue that inflation has already reached the Fed’s 2% threshold, according to their own calculations, and recall that it is one of the two requirements that the central bank set before considering a rate hike.
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“There are many reasons to think that we can be on that goal right now,” Bostic told the media.
However, the Federal Open Market Committee has yet to agree on the metrics it will use to measure this progress. For his part, Barkin has argued that the high inflation observed this year may have satisfied one of the Fed’s benchmarks for raising interest rates.
According to the current orientation of Fed policy, rates will rise “when inflation reaches 2%, which I think it can be argued that it has already done so, and it seems that it will remain there,” he assured
His statements delve into the idea launched in July by St. Louis Fed President James Bullard, who assured that the current rate of inflation, 3.5%, is well above the central bank’s 2% target.