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Small asset taper possible for October: Fed’s Bullard

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Small asset taper possible for October: Fed’s Bullard

Federal Reserve Bank of St. Louis President James Bullard made headlines Friday after stating October could be the first month the US central bank reigns in record stimulus. A small tapering could commence as early as next month after the “wait and see” approach prevented the Fed from shifting its policy in the September meetings, according to Bullard.

As a voting member of the Federal Open Market Committee, Bullard has supported record stimulus. On Wednesday he joined the majority of committee members who opted to wait for more compelling data before tapering the central bank’s $85 billion in monthly asset purchases. Bullard describes next month’s meeting as a “live” one because the committee’s decision could very well change based on the batch of data releases over the next several weeks. Officials will gather in Washington on October 29 for what will be the FOMC’s second last meeting this year to discuss monetary policy.

Fed officials will get the chance to weigh September employment figures and revisions from prior months at the next FOMC meetings, as well as updated housing and consumer inflation data.

Bullard was dismayed at the market’s reaction to the Fed’s latest decision, echoing remarks made repeatedly by central bank Chairman Ben Bernanke that stimulus was “data dependent.” Bullard added a Fed taper is entirely dependent on improvements in the economy over the second half of the year.

Talks of a bond taper have intensified ever since Ben Bernanke hinted at the possibility in May of this year. The majority of economists expected a small taper to the tune of $10 billion this month, according to a September survey by Bloomberg News.

Several regional Fed presidents will speak about monetary policy next week, and will touch upon the central bank’s latest decision. The Fed’s Lockhart and Dudley will speak Monday, followed by George and Evans later in the week.

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