Atlanta Federal Reserve Bank President Raphael Bostic said Thursday that the Fed should end its monthly bond purchases in the first quarter, rather than at mid-year 2022, as planned.
Fed Chairman Jerome Powell said Tuesday that the Fed might consider speeding up its taper of bond buying at the next policy meeting Dec. 14-15.
So what has changed since the Nov. 2-3 meeting in which the Fed announced it would start tapering last month and finish in June 2022?
Inflation is what has changed. Consumer prices surged 6% in the 12 months through October — the largest annual increase in more than 30 years.
There’s strong economic growth (many analysts predict GDP expansion of about 5% in the fourth quarter) and falling unemployment (it registered 4.6% in October) in addition to the rampant inflation, Bostic noted to Reuters.
"I think having this finished some time before the end of the first quarter would be in our interest," he said, referring to tapering.
The Fed’s long-term inflation goal is 2%, based on the personal consumption expenditures price index, which soared 5% in the 12 months through October.
If inflation remains around 4% through next year, "there’s going to be a good case to be made that we should be pulling forward more interest rate increases and perhaps even do more than the one I’ve penciled in," Bostic said.
Until Tuesday, most economists didn’t expect the Fed to raise rates until the second half of next year, but now the forecasts are moving forward.