Jun 22, 2021 - Economy

What Fed officials are saying about easing up on emergency market support

Jimmy Bullard.

St. Louis Fed president Jim Bullard. Photo: Luke MacGregor/Getty Images

Federal Reserve officials are taking the stage this week, following news the Fed is thawing to the idea of reducing its emergency market support.

Between the lines: Examined together, comments in the WSJ Monday from three Fed officials, plus Fed chair Jerome Powell, provide reassurance to markets that on the one hand, the economic recovery is strong — and on the other, the Fed will continue its support for the time being.

Why it matters: We heard from Powell at last week's press conference following the Federal Open Market Committee meeting — and now we’re hearing directly from other officials who will be involved in planning the Fed’s eventual retreat.

What they’re saying:

  • New York Fed president John Williams said that even though the economy is improving rapidly, he isn’t ready for the Fed to ease up on support.
  • Dallas Fed president Robert Kaplan said he thinks the central bank should take its foot off the accelerator sooner rather than later in a bid to "avoid having to press the brakes down the road" with a more abrupt shift in monetary policy.
  • St. Louis Fed president Jim Bullard was somewhat aligned with Kaplan, saying it’s appropriate that the Fed has begun talking about tapering, but added that it will take some time before any plans are actually made.

Of note: Williams is a voting member of the FOMC, but Kaplan and Bullard are not — yet. Bullard will get a vote next year, and Kaplan can vote in 2023, based on the scheduled rotation.

Powell on Monday afternoon also released prepared testimony for today's Congressional hearing on the Fed's response to the pandemic. It largely echoed his prior comments, anticipating strength in jobs and acknowledging higher-than-expected inflation.

The bottom line: The talking about tapering has begun. Watch for more appearances by Fed officials in the coming weeks as the discussion continues.

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