Fed policymakers hone in on Nov. taper timeline

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    Three US Federal Reserve policymakers on Tuesday said the economy has healed enough for the central bank to begin to withdraw its crisis-era support, cementing expectations the Fed will start to taper its monthly bond purchases as soon as next month.

    “I myself believe that the ‘substantial further progress’ standard has more than been met with regard to our price-stability mandate and has all but been met with regard to our employment mandate,” Fed Vice Chair Richard Clarida told the Institute of International Finance virtual annual meeting.

    He was referring to the Fed’s promise to keep buying $120 billion of Treasuries and mortgage-backed securities each month until the economy had met that standard on both its mandates.

    Fed policymakers at their last meeting agreed that tapering “may soon be warranted” and would likely conclude in the middle of next year, he said.

    Clarida’s upbeat assessment likely echoes the sentiments of his boss, Fed Chair Jerome Powell, who previously said that he only needed to see a “decent” September US jobs report to be ready to begin to taper bond buys in November.

    The economy has strengthened and “conditions in the labor market have continued to improve,” Clarida said, although he noted the pandemic continues to weigh on employment and participation.

    Speaking in separate appearances on Tuesday, both Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard said they also endorsed a November start.

    “I think that the progress has been made, and the sooner we get moving on that the better,” Bostic said in an interview with the Financial Times.

    Bullard, speaking on CNBC, said he would like to wrap up the taper by the first quarter of 2022 so that if inflation stays high or goes even higher the Fed could raise rates “in the spring or summer if we had to do so.” – Reuters