The Federal Reserve appears to be on its way to consider a more rapid downsizing of its gigantic bond buying program just weeks after putting in place a plan to methodically reduce buying.
A trio of policy makers –Vice President Richard Clarida, Governor Christopher Waller and President of the Federal Reserve Bank of St. Louis James Bullard, noted this week that the question of a faster reduction could be on the table when the Federal Open Market Committee meets on December 14-15.
“It is very possible that at that meeting the possibility of increasing the rate of reduction” of asset purchases will be discussed, Clarida said.
Upside risk for inflation
In a conference of the San Francisco FedHe stated that the US economy is in a “very strong position” and that there is a “upside risk to inflation.”
A faster reduction of the so-called quantitative easing program would give central bankers an earlier opportunity to raise interest rates from close to zero if they deem it necessary to avoid overheating the economy.
Members of the Fed have spoken out against raising rates and tightening credit while pumping money into the economy by buying bonds.
End of reduction in mid-2022
Just over two weeks ago, the FOMC announced that it would begin reducing its monthly asset purchases worth $ 120 billion at a steady rate that will see it complete by mid-2022.
But economic data released since then has surprised in the direction of the hawks, he said. JPMorgan Chase Chief Economist Michael Feroli.
Consumer prices soared 6.2 percent in October from a year earlier. led by cars, food, gasoline and electricity.
The labor market also surprised to the upside. The number of jobs increased by 531,000 last month, after a 312,000 increase in September, while the unemployment rate fell to 4.6 percent from 4.8 percent.
“The risk of accelerating the set-up at the December meeting has increased,” he said. Bret Ryan, economista de Deutsche Bank.