Some of the world’s most powerful central bankers will convene virtually this week, with the focus on any commentary suggesting a pullback in pandemic-era easy money policies from the Federal Reserve.
One challenge: the timeline for slowing the central bank’s $120-billion-a-month pace of asset purchases will be different depending on which Federal Open Market Committee member you ask. The divergence on the FOMC will draw attention to the Fed's Jackson Hole meeting (which was again moved online over COVID-19 concerns), where Fed Chairman Jerome Powell is scheduled to make a speech on Friday.
Minutes from the FOMC’s late-July meeting showed “most” of the committee’s 18 members seeing the case for announcing a taper before year’s end.
A better-than-expected July jobs report may have advanced that timeline for some officials.
“I support bringing asset purchases to an end under these conditions,” Kansas City Fed President Esther George said on Aug. 11. Dallas Fed President Robert Kaplan similarly advocated for slowing purchases, as soon as the next policy-setting announcement on Sept. 22.
Other Fed officials, like Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari, have said they would need a few more months’ worth of data first.
“I’d like to see a few more employment reports,” Evans told reporters on Aug. 10.
The wide range of Fedspeak on tapering mirrors predictions from Wall Street, where Fed watchers are attempting to place bets on the timing of a taper announcement. BofA Securities and Evercore ISI are among the teams expecting the Fed to kick off tapering in November, but ING Economics is penciling in a September announcement.
What about Powell?
One person who may stay mum on the topic: Fed Chairman Jerome Powell. The Fed chief will likely make a speech on Friday, but expectations are for him to stay focused on the conference’s official theme of "macroeconomic policy in an uneven economy.”
“I don’t expect a lot of fireworks. I think this is not the time nor the place to bring up a ‘we’re about to start tapering,’” Jefferies Managing Director David Zervos told Yahoo Finance.
Tim Duy at SGH Macro Advisors similarly noted that Powell seems poised to steer clear of taper talk “unless he wanted to urge the Fed to reach a consensus at the next meeting,” which Duy said was unlikely.
The Jackson Hole meeting is not a policy-setting event, meaning that Powell’s speech will not announce any major move on the central bank’s monetary policy stance. There are only three more scheduled FOMC decision meetings this year: Sept. 22, Nov. 3, and Dec.15.
But taper talk could overshadow the paper discussions scheduled at the conference, as Fed officials interact with the media and offer their updated outlooks on the economic recovery.
What Fed officials have said so far about tapering:
Fed Chairman Jerome Powell (voter): “We’re making progress. We expect further progress. And we expect that, if things go well, then we will reach that goal. And when we reach it and the Committee is comfortable that we have reached it, then we’ll taper at that point.” (Press conference, July 28)
Fed Vice Chairman Richard Clarida (voter): “If my baseline outlook does materialize, then I can certainly see supporting announcing a reduction in the pace of our purchases later this year.” (Remarks at the Peterson Institute for International Economics, Aug. 8)
Fed Vice Chairman Randal Quarles (voter): No public remarks on tapering.
Fed Governor Lael Brainard (voter): “The determination of when to begin to slow asset purchases will depend importantly on the accumulation of evidence that substantial further progress on employment has been achieved. As of today, employment has some distance to go.” (Remarks at Aspen Economic Strategy Group, July 30)
Fed Governor Michelle Bowman (voter): “There is more work to be done to get the economy back on strong footing.” (Remarks at Fed research seminar, Aug. 3)
Fed Governor Christopher Waller (voter): “I think you could be ready to do an announcement in September.” (CNBC interview, Aug. 2)
Boston Fed President Eric Rosengren: “If we continue going into September having labor markets continue to improve the way it has done over the last two months, in my personal view, we would have achieved substantial further progress in labor markets as well. That would set up some time this fall a possible tapering.” (Wall Street Journal interview, Aug. 16)
New York Fed President John Williams (voter): No public remarks on tapering.
Philadelphia Fed President Patrick Harker: No public remarks on tapering.
Cleveland Fed President Loretta Mester: No public remarks on tapering.
Richmond Fed President Thomas Barkin (voter): “We are closing in...I don’t know exactly when that will be. When we do close in on it I am very supportive of tapering and moving back toward a normal environment as quickly as the economy allows us.” (Reuters interview, Aug. 11)
Atlanta Fed President Raphael Bostic (voter): “Right now I’m thinking in the October to December range, but if the [next jobs report] comes back big...I’d be open to moving it forward.” (Press scrum, Aug. 9)
Chicago Fed President Charles Evans (voter): “We are coming upon the time where it’s definitely going to be appropriate to start correcting that and tapering seems to be the word. I’d like to see a few more employment reports.” (Press scrum, Aug. 10)
St. Louis Fed President James Bullard: “I think you should be done with the taper at the end of the first quarter from a risk management perspective. That doesn’t mean you have to do anything on rates but you’d have optionality on rates at that point.” (Press scrum, July 30).
Minneapolis Fed President Neel Kashkari: “If we see a few more jobs reports like the [July report], then I would feel comfortable saying yeah, we are — maybe haven’t completely filled the hole that we’ve been in — but we’ve made a lot of progress, and now, then will be the time to start tapering our asset purchases.” (Bloomberg interview, recorded Aug. 9)
Kansas City Fed President Esther George: “[T]he expectation of continued strong demand, a recovering labor market, and firm inflation expectations are consistent, in my view, with the Committee’s guidance regarding substantial further progress toward its objectives. I support bringing asset purchases to an end under these conditions.” (Remarks at the National Association for Business Economics, Aug. 11)
Dallas Fed President Robert Kaplan: “It would be my view that if the economy unfolds between now and our September meeting...if it unfolds the way I expect, I would be in favor of announcing a plan at the September meeting and beginning tapering in October.” (CNBC interview, Aug. 11)
San Francisco Fed President Mary Daly (voter): “It’s appropriate to start discussing dialing back the level of accommodation that we’re giving the economy on a regular basis, and the starting point for that is of course asset purchases...talking about potentially tapering those later this year or early next year is where I’m at.” (Financial Times interview, Aug. 12)
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
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