Dallas Federal Reserve President Robert Kaplan stated that the central bank should gradually begin tapering assets sooner than later.
He also argued that the massive bond-buying program is leading towards an excessive risk-taking approach.
He added that the Fed should slash $10 billion in the monthly Treasury purchases. Also, $5 billion should be cut from the mortgage-backed securities. This will end the bond-buying program in eight months.
An analyst commented that Kaplan’s proposed pace would mean that the purchases of two assets would fall in lockstep.
It is because the Fed is currently buying $80 billion in Treasuries per month and $40 billion in mortgage-backed securities.
Due to this, some policymakers argued to reduce mortgage purchase although there is a surge in housing prices.
Last Friday, two days after Kaplan’s statement, the government released the U.S. jobs data.
The non-farm payrolls climbed 943K jobs in July, which is the most in nearly a year. It increased from its previous 938K data against analysts’ estimate of 870K.
This data is better than the expected 5.70% drop from the previous 5.9% record.
At the Fed’s latest July meeting, policymakers started debating on when and how they should taper the asset purchases.
ECB Plans to Tighten Monetary Policy
Meanwhile, the European Central Bank is planning to tighten its monetary policy to counter the inflationary pressures.
Countries in the eurozone increased their borrowing to survive the coronavirus pandemic.
A policymaker commented that the central bank made it clear that it will only tighten its monetary policy if the price outlook dictates.
He added that they cannot take into account the financing costs of each member state since the ECB needs to act alongside its price stability objective.
Additionally, it warned that the fast surge of the COVID-19 delta strain imposes a great risk to the recovery of the eurozone area.