Three Fed hawks push early taper despite risk from delta

Three of the Federal Reserve’s leading hawks, on the eve of the central bank’s annual Jackson Hole symposium, urged that policymakers move quickly to slow asset purchases despite the risk from the spreading delta variant.

Federal Reserve Bank of Dallas President Robert Kaplan said he favors an announcement at the central bank’s September meeting to begin tapering bond buying in October or soon after. St. Louis’ James Bullard called for a start in the fall — finishing by the end of the first quarter in 2022, while Kansas City Fed’s Esther George urged an early move begin this year.

The three, speaking in television interviews, highlighted one side of the debate among U.S. central bankers. None of them votes on policy in 2021. Fed Chair Jerome Powell has struck a more patient tone and will give his take on the outlook today in a virtual speech to get the daylong forum underway.

“I think it’s important to get started, and the conditions of pace, timing of when we end,

I’m open minded to listening to the debates around that,” George said in a Bloomberg TV interview with Michael Mckee done Wednesday evening. “But I am less interested in deferring that decision.”

Bullard echoed that view in a CNBC interview Thursday, adding the delta variant’s impact could be peaking.

“Some on Wall Street seem to think that the numbers are rolling over on delta,” he said. “I don’t really know if we can say that yet, but it will peak at some point. The main message here is the economy has learned to adapt to the pandemic.”

U.S. stocks fell as investors digested their views. Treasury yields rose, as did the dollar.

Though George has been a longtime policy hawk, and Bullard has changed his views to more hawkish this year in light of a stronger job market, both will gain votes in 2022 on the policy-setting Federal Open Market Committee. Kaplan, also a hawk, will vote next in 2023.

“It would continue to be my view that when we get to the September meeting, we’d be well served to announce a plan for adjusting purchases and begin to execute that plan in October or shortly thereafter,” Kaplan told CNBC.

That seemed a small shift in tone from his most recent comments, when he said he would be open to adjusting calls for a quick tapering of bond buying if delta hurts the economy’s progress.

George suggested she might have more flexibility on when the taper should actually be implemented, saying: “I think we should get started this year so that we can begin to pare the amount of accommodation.”