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The Federal Reserve should be prepared to talk about slowing its asset purchases at a faster pace at its next meeting in mid-December, Atlanta Fed Chairman Raphael Bostic said on Monday.
“I think there are some good points to be made that we should really think about how fast we are running the cone,†Bostic said in an interview with Bloomberg Television.
A faster rate of reduction would give the Fed the opportunity to “take off” or raise short-term interest rates, sooner than expected. The Fed has kept short-term rates close to zero since the worst days of the pandemic.
Right now, the Fed is buying $ 105 billion worth of treasury bills and mortgage debt, and slowing the pace of purchases by $ 15 billion each month.
At the current rate, purchases will end next June. Most economists say the Fed won’t raise short-term interest rates until it completely ends its asset purchase program.
A number of Fed officials have said they support a faster cut or are at least open to discussion.
“It’s appropriate for us to talk about the rate of decline and to be open to a faster rate,†Bostic said.
The Atlanta Fed chairman has said he expects further high inflation measures. If the employment numbers are just as strong, “I think the case would be a lot stronger for a faster cut,” he said.
The Labor Department will release the November employment report on December 3. The economy created 531,000 net jobs in October and the unemployment rate fell to 4.6%.
Regarding interest rate movements, Bostic said he had believed for several months that it would be appropriate to raise short-term interest rates once in 2022. Fed officials are also divided on 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 make Fed Governor Lael Brainard its number 2. The two appointments are subject to confirmation by the Senate.
Bostic said the move announced by Biden “really takes some uncertainty” out of the equation and allows the Fed to devote 100% of its attention to “trying to discern what’s going on in the economy.”
Many Fed watchers believe Biden might decide to bring in Bostic to be the central bank’s main supervisor of the banking sector. There will be three vacancies on the Fed’s board of directors, once Powell and Brainard are confirmed.
When asked about the possibility, Bostic only said he had no trips to Washington on his schedule.
The 10-year Treasury yield TMUBMUSD10Y,
rose eight basis points to 1.63% following Biden’s decision to renew Powell, with investors believing it removed an obstacle to central bank tightening.
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