Fed Atlanta President Bostic Says Faster Taper Would Give Option for Earlier Hikes

(Bloomberg) - Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank may need to speed up its removal of monetary stimulus in response to strong employment gains and surging inflation, allowing for an earlier-than-planned increase in interest rates.

“A faster taper would certainly give us more optionality as we move into 2022 and see sort of where the data takes us,” Bostic said Monday in a Bloomberg Television interview with Kathleen Hays. “I definitely think it is appropriate for us to be talking about the pace of tapering and being open to a faster one.”

Fed officials could debate a more rapid drawdown of their mammoth bond-buying program at their upcoming Dec. 14-15 policy meeting. A trio of policy makers -- Vice Chair Richard Clarida, Governor Christopher Waller and St. Louis Fed President James Bullard -- said last week that a faster taper might be considered when U.S. central bankers next gather.

A swifter reduction in asset purchases would give policy makers an earlier opportunity to lift interest rates from near zero should they deem that necessary to keep the economy from overheating. The current pace of tapering, which got underway this month, would imply wrapping up the process in June 2022.

Asked if he would support ending the taper by the end of the first quarter, Bostic said, “That timing I would be comfortable with given the way the data has come in recently.”

Still, Bostic, who votes on monetary policy this year, said he wanted to see additional employment gains, noting data have been volatile, and whether inflation persists at a high level.

More Data

“We are going to see more data between now and when we have to make that decision and have those conversations,” he said. “That will really guide us I think in having a perspective on what the appropriate pace is and whether we need to move faster.”

The Atlanta Fed chief has been cited in economists’ reports as a possible candidate for the position of Fed vice chair of supervision, which has been vacant since Randal Quarles’ term in the role expired in October.

The first Black regional Fed president in the central bank’s 107-year history, Bostic said he would like to see diversity on the Fed board and it was important that a vice chair for supervision be sensitive to structural barriers from racism from the financial industry. But he suggested that he was not talking to the White House about a new job.

“I don’t have any trips to Washington on my calendar,” he said.

By Steve Matthews


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