Fed’s Bullard (2022 voter) says he want to get going on tapering this year - repeats he wants taper completed by end-Q1 2022; there is more inflation than expected in the US, sceptical inflation will moderate in 2022

• Sees inflation around at least 2.5% in 2022; high inflation will be a problem for everyone and particularly low income families


• The economy has adapted to the pandemic, Delta variant will "peak at some point"; the economy does not need more stimulus right now


• Repeats that the quick end taper will allow optionality for rate hikes, if inflation moderates then it can be delayed


• Bullard notes of several reasons to pull back in emergency measures - also cites housing market


• Bullard expressed concern on the housing market - says Fed should not be complacent about it


• Real wages at this point are falling


• Fed is coalescing around a plan for taper


• On the balance sheet, Bullard said Fed should allow its maturing holdings to run off after the taper is complete, letting the balance sheet gradually decline

Reaction details (13:45)

• Amid this commentary US equity futures have come under pressure and we have seen further downside in the core fixed income space elevating US yields across the curve which is currently a touch steeper compared to slight flattening action in the latter-half of the European morning.

Analysis details (13:42)

• Overall, Bullard appears to be sticking to the general tone of his well-known hawkish stance on the taper.


• Thus far, the 2022 voter has not ‘moderated’ his language around the next steps for policy in a similar vein to remarks on August 20th from 2023 voter Kaplan, who is also regarded as a hawk; as a reminder, Kaplan said that if they saw COVID Delta variant would be persistent or start to affect demand, they would have to adjust policy views accordingly (link)
  


• Note, on July 30th, Bullard stated he was nervous over an “incipient housing bubble”.

26 Aug 2021 - 13:35- Fixed IncomeData- Source: CNBC