Dallas Fed President Robert Kaplan said Friday that he thinks the central bank should begin discussions on slowing down, or tapering, its $120 billion of monthly asset purchases.
“At the earliest opportunity, I think it will be appropriate for us to start talking about adjusting those purchases,” Kaplan said, during a talk with the Montgomery County Texas Chamber of Commerce.
The Fed has said it would not start to taper its asset purchases until it had seen “substantial further progress” in meeting its two goals of full employment and 2% inflation.
Fed Chairman Jerome Powell has said he didn’t want the central bank to begin “talking about talking about” tapering yet. And at his press conference on Wednesday, Powell reiterated he thought talks of a taper were premature.
Based on Powell’s tone, many economist think that the Fed might not start those discussions until late summer.
Kaplan is in the more hawkish camp on monetary policy. Earlier this month, he said he thought the first interest rate hike might come in 2022. The median forecast of Fed officials is that liftoff of interest rates won’t happen until 2024 at the earliest.
In his remarks Friday, the Dallas Fed president said he thought the economy was improving and would soon reach the Fed’s prerequisite of “substantial further progress.”
“I think we’re going to reach that benchmark sooner than I would have expected in January,” he said.
“I think the U.S. economy would be far healthier when we have the ability to start weaning off those purchases,” he said.
Kaplan said the asset purchases were very important last year given strains in financial markets and the economy. But conditions have changed that make adjusting the purchases appropriate, he said.
“We’re now at a point where I’m observing excess and imbalances in financial markets,” he said. Stocks and the housing market are at historically high levels.
The yields on the 10-year Treasury note
was little changed at 1.638%.