It may be appropriate in December to discuss the acceleration of the phase-down of QE – Richard Clarida

FOMC Vice President Richard Clarida, said on Friday that it “might very well be appropriate” to discuss accelerating the pace at which the Fed is liquidating its bond buying program at the December policy meeting. Speaking at the San Francisco Fed’s Asia Economic Policy Conference 2021, he added that there are upside risks to inflation, that the economy is in a very strong position, and it looks like the fourth quarter is going to be a very good one.

Market reaction

The dollar has seen modest strength in recent trading after Clarida alluded to a rapid pace of QE reduction. Clarida is seen as the Fed’s most important “thought leader” given that he is actually an economist by trade, compared to Fed Chairman Jerome Powell, who is a lawyer. If you are open to the idea of ​​an accelerated QE tuning, it is much more likely that it will actually happen. Fed Governor Christopher Waller called for an accelerated QE reduction earlier in the session and the St. Louis Fed Chairman, who is a 2022 voter, called for the same earlier in the week.

Bost suggested doubling the QE downsizing pace to $ 30 billion per month, meaning the downsizing would end in April. An earlier end to the QE phasing out would come early when the Fed could raise interest rates. Therefore, short-term US yields have increased in recent trades; US 2-year yields are now lateralized on the day at 1.50%, having been as low as 0.45% earlier in the session.

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