Manager says Fed should be able in September to announce tapering

The chairman of the Federal Reserve (Fed, the US central bank) in Dallas, Robert Kaplan, said on Thursday that his outlook for the US economy has not changed so far.

During an interview with CNBC, he argued that by September the Fed will be in a position to announce the beginning of the gradual reduction in bond purchases (“tapering”). According to the official, this cut could begin to be executed “in October or shortly after that”.

With no voting rights in monetary policy decisions this year, Kaplan argued that economic activity has resisted further surges of covid-19 in the United States, given the spread of the delta variant.

He said that people are learning to deal better with the situation, and he also noted that vaccines and the use of masks have helped to control the situation. “I prefer to start tapering soon and be gradual” in reducing bond purchases, he said.

According to the director, this process could take “eight months or so”, but he is open to discussing other options.

The official noted that the Fed’s bond purchases contribute to an excessive risk-taking in the markets.

He also argued that bond purchases support demand, but now there is no such problem in the US, unlike the picture at the height of the covid-19 crisis.

Kaplan also emphasized that the decision on the pace of bond purchases is not related to the timing of interest rate hikes. In its forecast, the Fed is likely to raise interest rates in 2022.

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