Fed Daly says open to supporting a faster tapering of bond purchases, if economic trends continue

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San Francisco Fed Chair Mary Daly said Wednesday that a case could be made for the Federal Reserve to accelerate its bond purchases in December.

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Daly said she wants to take a look at two important data points – the November jobs report and the November consumer price index inflation reading – before making a final decision ahead of the Fed’s next policy meeting on December 14-15.

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In an interview with Yahoo Finance, Daly said that “if things continue to do what they were doing, I would fully support the faster pace.”

“It is too early to call it today. I am looking at that data carefully and look forward to deliberations in December,” she said.

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The headline CPI index hit a 30-year high in October. At the same time, the October job report showed a stronger labor market in late summer than the data indicated.

At its meeting earlier this month, the Fed decided to reduce its asset purchases at a pace of $15 billion per month — reducing total purchases this month to $105 billion. A reduction in this monthly momentum would mean that the Fed would be buying assets by June.

Some Fed officials have said they want to speed up the tapering so that asset purchases end in March. Others have only said that they would welcome the discussion.

Financial markets see the end of asset purchases as a necessary condition for a “lift-off” for the Fed and raise its short-term interest rate to near-perfect levels since March 2020.

President Biden said on Monday that he would seek a second term for Fed Chairman Jerome Powell, with investors starting to price-go into a more aggressive Fed in 2022. At the moment, markets see three quarter-point rate hikes next year starting in June.

The Fed was equally divided in its previous forecast on whether it would raise rates one more time next year.

Yield on 10 Year Treasury Note TMUBMUSD10Y,
1.652%
It has risen above 1.67% on Wednesday, close to this year’s high of 1.75%.

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