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Dallas Federal Reserve President Rob Kaplan said he may rethink his call for the Fed to quickly start to taper its $120 billion per month in bond purchases if it looks like the spread of the coronavirus delta variant is slowing economic growth.
Earlier this month, Kaplan said the Fed should announce its intention to taper the bond purchases in September and start the slow down in October. In late April he was the first top Fed official to call for a taper to begin.
In an interview with Fox Business Network on Friday, Kaplan said the delta variant has caused him to have an open mind about the path of monetary policy. He called the delta variant “the big imponderable” in the outlook.
“It is in all of our interest to slow the spread, and right now we’re in a negative trend,” he said.
To date, the spread of the virus has not had a material effect on dining out and other consumer activity, Kaplan said, adding that he was basing this view on high frequency data. During the depth of the pandemic, the Dallas Fed released a monthly tracker on consumer mobility.
Instead, the delta variant is slowing down a return to the office and hiring, as well as limiting production which is exacerbating supply constraints, Kaplan said.
“The thing that I am going to be watching very carefully over the next month, before the next [Fed] meeting, is [whether] it is having a more material impact on slowing demand and slowing GDP growth. I’m going to keep an open mind on that, and if it is having a more negative effect that might cause me to adjust my views somewhat from ones that I’ve stated,” he said.
The outlook for U.S. stocks
DJIA,
SPX,
turned positive after Kaplan’s comments. The recent selloff of stocks was based on fears about Fed policy and the pandemic’s impact.
