Fed’s Bostic says good arguments can be made to consider a faster taper

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Atlanta Fed Chairman Rafael Bostic said Monday that the Federal Reserve should be open to talking about slowing its asset purchases at a sharper pace at its next meeting in mid-December.

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“I think there are good arguments to be made that we should really consider how fast we execute the taper,” Bostic said. In an interview on Businesshala Television.

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The faster pace of tapering would give the Fed the option of “raising” or raising short-term interest rates sooner than expected. The Fed has kept short-term rates near zero since the worst days of the pandemic.

At the moment, the Fed is buying $105 billion of Treasury and mortgage loans, and slashing the pace of purchases by $15 billion each month.

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At the current pace, the purchase will end next June. Most economists say the Fed will not raise short-term interest rates until it completely phases out its asset-buying program.

Several Fed officials have said they support either faster taping or are at least open to discussion.

“It’s appropriate for us to talk about tapering pace and be open to faster speeds,” Bostic said.

The chairman of the Atlanta Fed said he expects more strong inflation readings. If the employment numbers are similarly strong, “I think the case will be too strong to decrease rapidly,” he said.

The Labor Department will release the November job report on December 3. The economy added 531,000 net jobs in October and the unemployment rate fell to 4.6%.

Regarding interest rate moves, Bostic said he has felt for several months that it would be appropriate to raise short-term interest rates once during 2022. Fed officials are equally divided over whether there will be any rate moves next year.

In Monday’s interview, Bostic said he welcomed President Joe Biden’s decision to give Fed Chairman Jerome Powell a second four-year term, and Fed Gov. Made Lyle Brainard his number 2. Both nominations are subject to Senate confirmation.

Bostic said the decision announced by Biden “really removes some of the uncertainty of the equation” and allows the Fed to spend 100% of its focus on “trying to figure out what’s happening to the economy.”

Many Fed watchers think Biden may decide to tap Bostic as the banking industry’s central bank’s top supervisor. Once Powell and Brainard are confirmed, there will be three vacancies on the Fed’s seven-member board.

When asked about the possibility, Bostic only said that there is no trip to Washington on his calendar.

Yield on 10 Year Treasury TMUBMUSD10Y,
The move rose eight basis points to 1.63% in the wake of Biden’s decision to reappoint Powell, as investors thought it removed an impediment to the central bank’s toughness.


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