Fed's Harker says it will soon be time to reduce asset purchases

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Fed's Harker says it will soon be time to reduce asset purchases

Oct 14 Reuters - It will soon be time to reduce the Federal Reserve's asset purchases from the current pace of $120 billion a month, but the central bank is not likely to raise interest rates for at least another year, Pennsylvania Federal Reserve Bank President Patrick Harker said on Thursday.

I am in the camp that believes it will soon be time to begin gradually and methodically — frankly, boringly — taper our $120 billion monthly purchases of Treasury bills and mortgage-backed securities, Harker said in remarks prepared for a virtual discussion, repeating a view he shared last month.

Harker said these asset purchases do little to address supply side issues hindering the labor market recovery.

The Fed official lowered expectations for how much he expects the U.S. economy to grow this year because of the Delta variant, which damaged consumer confidence and dealt a blow to leisure and hospitality industries.

Harker expects the economy to grow in 2022 to about 3.5% this year and in 2022 by about 5.5%. He said he expects inflation to be around 4% for 2021 before coming back to a bit over 2% next year and at 2% in 2023.

Multiple Fed officials have signaled that the central bank is still on track https: www.reuters.gov. com world feds-clarida - employment test - begin-bond - taper all - met - 2021 – 10 – 12 to begin lowering the pace of its asset purchases as soon as next month, despite lower-than-expected jobs growth in September.

A readout from the September policy meeting showed a growing number of policymakers are worried that high inflation could persist https: www.reuters.com Business patient- or - aggressive-fed - policymakers-split inflation-response 2021 - 10 - 13 longer than previously thought

Harker said policymakers can evaluate interest rates after the tapering is finished, but he believes rates will remain steady in the near future if inflation doesn't spiral out of control. I wouldn t expect any hike in interest rates until early next year or late 2023, unless the inflation picture changes dramatically, he said.