Heads of the US Federal Reserve have spoken out in favour of phasing out the extensive buying program with which the umbrella of central banks supports the economy. Every month, USD 120 billion in loans is bought to counter the negative impact of the corona pandemic.
With the economic recovery underway, local Fed presidents Esther George of Kansas and James Bullard of St. Louis believe it is time to phase out the stimulus.
In a TV interview with the Bloomberg news agency, George acknowledges that the more contagious Delta variant of the coronavirus poses risks to the American economy and labour market. “But I don’t think this changes anything in my own judgment that it’s time for adjustments, given the progress we’ve made so far.” According to her, the speed of phasing out can be negotiated, but the start should not be delayed too long.
Bullard would prefer to see the asset purchase program terminated by the end of the first quarter of 2022. That would provide leeway in raising interest rates. It was drastically reduced in March last year due to the corona crisis. “We have a booming economy that probably doesn’t need further stimulus at this point,” he told CNBC.
The Fed presidents made their statements at the annual meeting of central bankers in Jackson Hole. Fed Chairman Jerome Powell will speak at the event Friday, which will take place virtually. Investors and analysts are on the lookout for signs of phasing out stimulus measures. These have contributed to low-interest rates, which has led to record stock markets. But inflation is rising due to the influx of money and the economic recovery. This increases the call for an end to the cheap money policy.