A growing chorus of market watchers is saying the Federal Reserve may have to speed up its reduction of asset purchases in light of the fastest inflation in 30 years.
The calls, ranging from former New York Fed President Bill Dudley to St. Louis Fed President James Bullard, are coming at a tricky time for the central bank, which only announced plans to reduce its bond-buying program less than two weeks ago, while noting it could tinker with the $15 billion monthly tapering pace if warranted. A week later, a report showed the consumer price index rose at the fastest annual pace since 1990.
That’s not to say the data-dependent Fed will react to just one inflation print, but it will see the November CPI report as well as the October reading of its preferred price gauge, the personal consumption expenditures index, before its December meeting.
Here’s what some have had to say:
Bill Dudley, former New York Fed president
“To change their mind, they have to accelerate the taper. They’re going to have to get the taper done quicker,” Dudley, an opinion columnist for Bloomberg and senior research scholar at Princeton University, said on Bloomberg Television Monday.
However, doing so could be “problematic” because the Fed could stir a taper tantrum that it’s been trying to avoid, he said.
Lawrence Summers, former U.S. Treasury secretary
“The Fed should signal that the primary risk is overheating and accelerate tapering of its asset purchases,” Summers said in a Twitter thread Monday. “Given the house-price boom, mortgage-related purchases should stop immediately.”
