Federal Reserve Bank of St. Louis President James Bullard said the central bank should speed up its reduction of monetary stimulus in response to a surge in U.S. inflation.
“I think it behooves the committee to go in a more hawkish direction in the next couple of meetings so we are managing the risk of inflation appropriately,” Bullard, who votes on monetary policy in 2022, said in a Bloomberg Television interview Tuesday.
The Federal Open Market Committee earlier this month that it would begin tapering the $120 billion-a-month bond-buying program it put in place last year in the early days of the COVID-19 pandemic. The planned pace of reduction puts it on track to cease purchases entirely by the mid-2022.
Since then, government data have pointed to intensifying inflation, prompting some former officials to call for the Fed to speed up the tapering process. A Nov. 10 Labor Department report showed the consumer price index rose 6.2% in the 12 months through October, marking the highest inflation rate since 1990.
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“We could move faster — we kept optionality on this that we could speed up the taper if it is appropriate,” said Bullard, noting he had proposed an end of the tapering of bond-buying by March.
Bullard said the committee would also have the option to raise rates while the taper is going on if it wanted to move faster.
“Another consideration I would put on the table, and have put on the table, is we can allow runoff of the balance sheet at the end of the taper instead of waiting on that decision for a while,” Bullard said. “I think that would be a way to have a somewhat more hawkish policy than otherwise.”
Other Fed officials have been in no hurry to speed up the taper. Richmond President Thomas Barkin said Monday the central bank can be “patient” in assessing the taper and “it’s very helpful for us to have a few more months to evaluate.” Minneapolis President Neel Kashkari on Monday said, “We shouldn’t overreact to what is likely going to be a temporary factor.”