Fed’s Harker says it will soon be time to start tapering asset purchases

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Oct 14 (Businesshala) – It may soon be time to start reducing Federal Reserve asset purchases at the current pace of $120 billion a month, but the central bank is unlikely to raise interest rates for at least another year , Philadelphia Federal Reserve Bank President Patrick Harker said Thursday.

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“I am in the camp that believes it will soon be time to slowly and systematically – frankly, boringly – add up to our $120 billion in monthly purchases of Treasury bills and mortgage-backed securities. Reduce,” Harker said in remarks prepared for a virtual discussion, reiterating a view he shared last month.

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Harker said asset purchases are doing little to address supply-side issues hindering labor market recovery.

A Fed official lowered his expectations that he expects the US economy to grow this year due to a delta version of the pandemic, which hurt consumer confidence and jolted the leisure and hospitality industry.

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Harker now expects the economy to grow by about 5.5% this year and about 3.5% in 2022. He said he expects inflation to be around 4% for 2021 and “slightly higher” next year at 2% and “fine”. “2% in 2023.

Several Fed officials have indicated that despite lower-than-expected job growth in September, the central bank is still on track here to ease its asset buying momentum as of next month.

A readout of the Fed’s September policy meeting showed that a growing number of policymakers are concerned that high inflation could persist here longer than previously thought.

Harker said policymakers can evaluate interest rates after tapering is complete, but added that he expects rates to remain stable in the near future if inflation doesn’t spiral out of control. “I don’t expect any hike in interest rates until the end of next year or early 2023, unless the inflation picture changes dramatically,” he said. (Reporting by Jonelle Marte; Editing by Diane Craft)

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