Bostic Says Fed ‘Very Close’ to Conditions to Taper Bond Buying

(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said he would favor the central bank slowing its asset purchases with further near-term gains in U.S. employment.

“We should be trying to get our policies back into a more normal situation,” Bostic said in a Bloomberg Television interview Friday with Michael McKee. “We have been at a very extreme level of accommodation” and “the economy calls for us to pull off of that a little bit and let the economy stand on its own.”

Bostic’s comments were similar on timing to his view expressed in early August, when he said he could see a move following another month or two of big gains in jobs. He joins three Fed presidents -- Kansas City’s Esther George, St. Louis’s James Bullard and Robert Kaplan of Dallas -- who urged an early tapering in interviews ahead of Friday’s virtual Jackson Hole conference.

“We are very close and I am hopeful that will happen soon,” Bostic said in a CNBC interview earlier Friday. “My view would be let’s start the taper and let’s do it quickly. Let’s not have this linger.”

Bostic said the Fed has met its goal needed to taper regarding inflation, and could meet the labor market side of the equation soon. The central bank has pledged to buy $80 billion in Treasuries and $40 billion in mortgage-backed securities a month until the economy shows “substantial further progress” on inflation and employment as it recovers from Covid-19.

“On the employment side, we have made a lot of progress and I think we are on the road to that,” he said to CNBC. “A lot will depend on what happens in the next couple of months. If we see numbers comparable to what we have seen at the beginning of the summer, I think in my view it will be definitely satisfying the conditions for making that substantial further progress.”

Fed Chair Jerome Powell has struck a more patient tone and will give his take on the outlook Friday in a virtual speech to get the day-long forum under way. 

The Fed’s preferred measure of inflation remained elevated in new data released Friday, and Bostic said price gains may stay elevated into 2022.

“Business leaders that I talk to tell me that supply-chain challenges are significant,” he said. “What they thought were going to be short-term challenges are starting to look like they are going to last a bit longer, into 2022, and that has implications for what is going to happen in terms of prices.”

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