Randal Quarles, a governor of the Federal Reserve, said he was in favor of slowing monetary stimulus measures starting next month and expressed concern about increased inflationary pressures that might need to be addressed by policy.
"I will support our decision at the November meeting to start reducing asset purchases," he said in a speech prepared for a speech at the Milken Institute conference in Los Angeles on Wednesday. The buying program he is referring to is the Fed's current bond-buying program of $120 billion a month.
Fed officials are preparing to begin scaling back the bond-buying program set up at the start of last year's pandemic. According to the minutes of the last Fed policy meeting on September 21-22, they generally agreed to start the process in mid-November or mid-December.
Quarles said he agreed that the current high inflation is "temporary" and that the central bank's monetary policy is not lagging behind. Although supply disruptions during the Covid-19 pandemic pushed up prices, the rally lasted longer than expected, and the number of goods with soaring prices was expanding, he said.
"there is evidence over the past few months that broader prices are starting to rise at a moderate rate, and I am closely monitoring these developments," he said.
Fiscal stimulus
Quarles added that demand "is likely to be further boosted by the additional fiscal plan currently under discussion."
"if these developments cause this' temporary 'inflation to last too long, it could affect the planning of residents and businesses and shake their inflation expectations," he said. "this could lead to a wage-price spiral that will not subside even if logistics bottlenecks and supply chain problems ease."
The speech prepared by the Quarles did not make a clear prediction of the timing of the rate hike. Forecasts released at the end of the Fed's September meeting showed that officials were neck and neck on whether to raise interest rates next year.
"if we still see an inflation rate of 4 per cent or in this region next spring, then I think we may have to reassess the pace of interest rate increases we are considering," he said in a question-and-answer session. "