Federal Reserve Chair Jerome Powell said on Tuesday that the US central bank likely will discuss speeding up its taper of large-scale bond purchases at its next policy meeting, amid a strong economy and expectations that a surge in inflation will continue into the middle of next year.
The economy is very strong and inflationary pressures are high, and it is appropriate, in my view, to consider wrapping up the taper of our asset purchases, which was announced at the November meeting, possibly a few months later, and I expect that we will discuss that at our upcoming meeting in a couple of weeks, Powell said in testimony before the U.S. Senate Banking Committee.
The Fed is on track to full taper its $120 billion in monthly purchases of Treasuries and mortgage-backed securities by June, and is on track to reduce its support for the economy this month. The program was introduced in early 2020 to help the economy get through the COVID-19 pandemic.
There were a number of Fed officials who advocated for the central bank to speed up that pace to finish it sometime in the spring to allow for an earlier start of interest rate increases if inflation is to be reined in.
Powell said he is ready to join his colleagues in favoring a quicker wind-down of asset purchases, as financial markets continued to be roiled by the emergence of a new variant of the coronaviruses that may evade vaccinations. Markets connected to Fed policy expectations pushed back the perceived timeline for the start of rate hikes.
Powell's comments about a potential faster taper pace and that inflation should no longer be considered a transitory phenomenon reversed some of that momentum and drove bond yields higher.
The policy-setting Federal Open Market Committee will hold its next two-day policy meeting on December 14 -- 15.