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Exclusive: Fed's Kaplan wants bond-buying taper to start soon and be gradual

EconomyAug 04, 2021 02:01PM ET
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2/2 © Reuters. FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan speaks during an interview in his office at the bank's headquarters in Dallas, Texas, U.S. January 9, 2020. REUTERS/ Ann Saphir 2/2

By Ann Saphir

(Reuters) - The U.S. central bank should start reducing its bond-buying program "soon" and gradually, Dallas Federal Reserve President Robert Kaplan said on Wednesday, adding that doing so would give it more flexibility to be "patient" on raising interest rates.

"As long as we continue to make progress in July (jobs) numbers and in August jobs numbers, I think we'd be better off to start adjusting these purchases soon," Kaplan told Reuters in an interview.

Doing so gradually - over a time frame of "plus or minus" about eight months - will help "give ourselves as much flexibility as possible to be patient and be flexible on the Fed funds rate," allowing more progress on the labor market front, he said, referring to the central bank's benchmark overnight interest rate.

"I think it's very important to divorce discussion of the Fed funds rate from discussion of our purchases," he said. "My comments on purchases are not intended to suggest I want to take more aggressive action on the Fed funds rate."

In June, Kaplan said he was among the minority of Fed policymakers who thought the central bank might need to begin raising rates in 2022; the majority saw 2023 as the likely timing for a liftoff of the Fed funds rate, which is currently set near zero.

Kaplan said on Wednesday he did not know if he would pencil that same view in when policymakers submit their updated forecasts as part of the Sept. 21-22 policy meeting, but that it would depend on the economy.

The Fed is buying $80 billion of Treasuries and $40 billion of mortgage-backed securities (MBS) each month, and has said it will continue to do so until it sees "substantial progress" toward its goals of full employment and 2% inflation.

"I question, today, the efficacy of these purchases," Kaplan told Reuters, adding that he didn't think they were doing much to boost a labor market that he said was being held back not by lack of demand but rather by supply issues and a slow matching process between job openings and the talent to fill them.

Kaplan said he could envision reducing the Fed's purchases of Treasuries by perhaps $10 billion per month, and its MBS purchases by $5 billion per month.

Exclusive: Fed's Kaplan wants bond-buying taper to start soon and be gradual
 

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Comments (1)
Kelly Mayer
Kelly Mayer Aug 04, 2021 2:22PM ET
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This guy is insane... it's as if he is ignoring the surge in cases and mortality around the world... talk about an optimistic dangerous lunatic... or someone that deliberately wants to crash the market and the economy...
Bill Pulak
Bill Pulak Aug 04, 2021 2:22PM ET
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Kelly you clearly have never taken a economics course ever? What's insane is the fed continuing to feed a erupting fire with jet fuel? Housing Bubble..oh yea let's purchase 120 billion MBS a month because that's necessary. Please educate yourself before making such a absurd response public.
Meru Pet
Meru Pet Aug 04, 2021 2:22PM ET
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@op i am fed up of this covid narrative
Kelly Mayer
Kelly Mayer Aug 04, 2021 2:22PM ET
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Bill Pulak  oh, like the trillion dollar infrastructure bills that will further create chaos? Or like the suppression of c19early.com that could end the pandemic right now? You clearly have no clue whats going on behind that "economics" of yours and think this is about economics. See you in the winter, along with the multiple new contagious deadly variants and lockdowns coming. Only a fool cannot see whats coming and how covid is on the ideal path to mass mutate into many variants of concern. The fed is just gonna assist in crashing the economy even faster. Double dip recession almost guaranteed. Good thing biden is not allowing millu9ns of infected uncaccinated illegals into the country. Oh wait...
 
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