Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Fed hawks circle before Powell speech as they push for bond taper

Economy Aug 26, 2021 01:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: St. Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore October 8, 2018. REUTERS/Edgar Su/File Photo 2/2

By Howard Schneider and Lindsay (NYSE:LNN) Dunsmuir

WASHINGTON (Reuters) - The U.S. Federal Reserve's hawkish wing used the day before a marquee speech by Fed Chair Jerome Powell to urge the central bank to begin paring bond purchases they feel have become ineffective, it not downright harmful.

"We probably don't need the asset purchases at this point," St. Louis Federal Reserve president James Bullard said on CNBC on Thursday, repeating his call for the Fed to start trimming its $120 billion in monthly bond purchases soon and end the program by early next year.

Bullard, along with Kansas City Fed president Esther George and Dallas Fed president Robert Kaplan, also all downplayed the impact of the Delta variant in separate interviews, with George and Kaplan saying their business contacts were telling them the economic effects remained limited.

That represented an upgraded outlook from Kaplan, who last week had become more cautious about the potential harm to the economy from the highly contagious variant.

"By and large what we are hearing..is they are weathering this resurgence at least as well as previous surges, and many are telling us the impact on their business is more muted," Kaplan told CNBC.

Both Bullard and George indicated the central bank was making steady progress toward a plan to cut the bond purchases, which are aimed at keeping interest rates low to support the economy.

Bullard said the Fed was "coalescing" around a plan, and George told Fox Business that she expected there would be more information coming after the Fed's Sept. 21-22 meeting.

With strong inflation and expected continued job growth "there is an opportunity to begin to dial back on asset purchases," George said, with her preference being that the process start "sooner rather than later."

Kaplan too repeated his view that the Fed should announce a plan after its September meeting, with tapering to begin in October or "shortly thereafter" and finish about eight months later.

RISK OF HARM

Not beginning to reduce asset purchases soon risked harm to the economy, which is already grappling with growing imbalances, the policymakers said. All three cited the impact of high inflation on low- and moderate-income communities as they continue to argue that the Fed's goal of inclusive growth means both maximum employment and price stability.

Bullard also pointed to rising home prices as a concern. "You don't want to be too complacent," he said. "There is some worry that we are doing more damage than helping," by continuing to buy mortgage-backed securities that hold down borrowing costs and arguably support even higher asset values.

Their comments precede remarks by Powell on Friday that will provide an update on the economy, and likely touch on how the Fed views the competing risks of higher inflation against the possibility that a new surge of virus cases slows the U.S. economic recovery in a meaningful way.

Fed officials at their July meeting agreed it would likely be time to taper the bond purchases by later this year, and most analysts feel there is little difference to the economy if that process starts in any given month.

But the announcement of a plan will send a strong signal that the Fed feels the risks from the pandemic have receded enough to start reducing the extraordinary support rolled out in March 2020 to stave off a collapse.

It's a bit of communications the Fed wants to get right, and some have argued that is cause for a bit more patience.

Fed hawks circle before Powell speech as they push for bond taper
 

Related Articles

Ireland boosts budget package to fight inflation
Ireland boosts budget package to fight inflation By Reuters - Jul 04, 2022 1

By Padraic Halpin DUBLIN (Reuters) - Ireland can increase its budget package for 2023 to help to fight soaring inflation, the finance ministry said on Monday after forecasting a...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Larry Langley
Larry Langley Aug 26, 2021 11:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Their job is not to give interviews, speak publicly, or answer questions from talking heads with a vested interest. Do their work, keep quiet and the reports are all is to be done. This smacks of working with Hedge funds and other large capital firms. They lack integrity, ethics and ones speaking should resign or replaced immediately. Kaplan droned on for a week then changed his mind on Covid. Really? For a month he could see those reports here and globally. The market reflected that. So is he incompetent or something else. Market dried up that week and those with cash found nice entry points.
Hanna Christin
Hanna Christin Aug 26, 2021 9:36AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Forward guidance for the forward guidance
Edward Chong
Edward Chong Aug 26, 2021 9:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wow Powell under his command now .
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email