By Dhirendra Tripathi
The Federal Reserve should immediately start to cut back its bond buying, The Wall Street Journal reported Federal Reserve Bank of St. Louis President James Bullard as saying in an interview published on Tuesday.
“I think with the economy growing at 7% and the pandemic coming under better and better control, I think the time is right to pull back emergency measures,” Bullard told the WSJ.
Bullard’s comments are striking on two counts -- firstly, they come from someone who previously had a reputation as one of the more dovish members on the Federal Open Market Committee; secondly, they stand in stark contrast to warnings from other FOMC members about the dangers of withdrawing stimulus too soon.
New York Fed President John Williams, repeating comments he has made previously, said on Monday the U.S. economy has not yet achieved the "substantial further progress" threshold officials set for reducing the central bank's asset purchases, while San Francisco Fed President Mary Daly warned on Friday that a 'premature' withdrawal of stimulus would be a big risk, given the continued spread of new strains of the Covid-19 virus.
Of the Fed’s $120 billion a month purchases, $80 billion go to the U.S. Treasury market, while the rest go in buying mortgage bonds.