Fed's Quarles: It's clear we've met test for taper
20.10.2021, 17:09

Fed's Quarles: It's clear we've met test for taper

Reuters has reported that Federal Reserve Governor Randal Quarles on Wednesday said that while it's time for the Fed to begin dialing down its bond-buying program, it would be "premature" to start raising interest rates in the face of high inflation that is likely to recede next year.

Key comments

It's clear we've met test for taper.

Supports decision at November meeting to reduce fed's asset purchases, end taper by mid-2022.

Fed remains patient to allow more recovery in jobs.

Fed is not behind the curve on inflation fight.

Inflation likely will decline considerably next year, but upside risks 'significant'.

Constraining demand now would be premature.

Monitoring how additional fiscal programs could further boost demand.

Will wait to see further improvements in employment, evolution of inflation in coming months.

If inflation does not recede next year, or if expectations become unanchored, fed's tools can bring inflation down.

Own focus is turning to inflation, from labor market.

Sees strong economic growth for rest of 2021 and 2022.

Strong demand for labor outpacing supply, pushing up wages.

Labor force participation unlikely to return to pre-pandemic level.

Market implications

The market has priced in earlier Fed hikes and tapering to start imminently and the US dollar is giving back some initial speculative gains since the Fed started to turn hawkish over the last couple of meetings. The dollar index, DXY, was last down 0.23% at 93.57 as risk sentiment on the day has improved. 

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