Federal Reserve Bank of San Francisco President and FOMC member Mary Daly said on Wednesday that she sees the case to be made for speeding up the pace of the Fed's QE taper, which currently runs at $15B per month. If things continue to go as they have been going, she would completely support an acceleration of tapering, Daly added.
Daly continued that adding support to an already robustly growing economy isn't what the Fed wants to do and that she wants to bring that support down. However, she said that it would be premature to call for an acceleration of the taper today, as more data is needed. If the jobs market continues to fire on all cylinders and inflation comes in high again, that would support the case for acceleration, she said.
The decision on asset purchase tapering is different from that on rate hikes, she said, adding that her outlook is that the Fed is going to want to raise interest rates at the end of the next year. If there were one or two rate hikes next year, that would not surprise her at all, Daly said, saying that she wants to be data-dependent and not tied to any specific number of hikes. Even if the Fed did hike a few times next year, she added, it would still be providing accommodation.
Daly's hawkish remarks, where she has indicated her openness to a faster QE taper and flexibility on rate hikes in 2022, are boosting the US dollar and US bond yields. The DXY is at fresh 16-month highs just under 96.00 and 2-year yields are now up 3bps on the session at just under 0.65%, its highest level since the start of the pandemic.
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