Fiscally Focused: 3 Fed Presidents Talk Taper

Federal Reserve


St. Louis Federal Reserve Bank CEO and President, James Bullard, talked taper on CNBC‘s Squawk Box on Monday. When asked point-blank when the Federal Reserve was going to begin to taper and when it was going to start easing its foot off the bond-buying gas pedal, Bullard replied that tapering “is a data dependent program.” This means that the Fed must constantly review the data at hand and evaluate the state of the economy.

Bullard sees no need for speed in reducing the $85 billion per month bond-purchasing program. He acknowledged it is set at a “torrid pace,” but added he wants to see goals met too. Overall, the policy and program is “a very reasonable thing to do,” Bullard said. He cited job growth and a declining unemployment rate as positive markers. But before tapering begins, he wants to see inflation closer to 2 percent, rather than the 1 percent rate it has been hovering around.

The guidelines for tapering are not à la carte for Bullard, instead a ”notion of cumulative progress is the one you want to think about.” So even though there has been “substantial growth” not all of the indicators are projecting the progress Bullard wants in the economy.

Bullard’s remarks and appearance come after another Fed President appeared on Squawk Box. Last Friday, Charles Plosser, president of the Philadelphia Fed, said that by not tapering in September, the Fed ”clearly missed an opportunity.” Tapering, according to Plosser, would have shown that ”this is a dial we can move,” allowing for incremental adjustments as needed.

Plosser will be a voting member of the Federal Open Market Committee (FOMC), the committee of the Fed that meets and makes decisions on tapering and monetary policy in the U.S. When asked if his opinion, and upcoming seat at the table will shift the policy, Plosser said that changing the players won’t make that much difference because the FOMC wants a consensus on decisions.

Joining Plosser as a voting member next year will be President and CEO of the Federal Reserve Bank of Dallas, Richard Fisher. Fisher has been as outspoken, if not more so, than Plosser on tapering. Addressing the Australian Business Economists on Monday, Fisher gave his candid view on the current state of affairs. ”I say that the economy of the United States is hog-tied by a government that is sadly ineffective and, in fact, counterproductive,” Fisher said. As a result, the Fed has “had to carry the ball solo. This is an unhealthy thing for any central bank and comes with not insignificant risks.”

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