The Federal Reserve should start to slow down its bond purchases this fall and finish by March, St. Louis Fed President James Bullard said Friday.

In a speech to European Economics and Financial Centre, Bullard said that he thought financial markets “are very well prepared” for the reduction in purchases.

The Fed has been buying $80 billion of Treasurys and $40 billion of mortgage-backed securities each month since last June to support the economy and keep financial conditions easy.

With the economy growing at 6.4% annualized rate over the past six months, the Fed has begun to debate how and when to slow down these purchases.

The Fed has set a standard of “significant” further progress on its goals of full employment and stable 2% inflation before tapering the purchases.

Fed Chairman Jerome Powell said Wednesday that this “substantial further progress” standard has not yet been met and the central bank would watch the incoming data.

Bullard laid out an aggressive strategy based on data that already has been received. He said he expected GDP growth to be stronger in the second half and some of the surge of inflation this year would last into 2022.

“I think the committee should go ahead this fall and begin to taper, and I think you should go fairly rapidly,” Bullard said.

“I would have a target of finishing by the end of the first quarter next year,” he added.

This strategy would give the Fed the option to raise interest rates if inflation does not moderate as much as the Fed expects next year, he said.

Bullard will be a voter on the Federal Reserve’s policy setting committee in 2022.



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