Philadelphia Fed Bank President Patrick Harker suggested on Wednesday that the Federal Reserve should consider backing away from it’s so-called aggressive bond-buying, according to The Washington Examiner.
Translation? Government debt is getting out of control under the Biden administration.
Harker’s prepared remarks were delivered at a virtual meeting where he also said that while the bank is planning to keep their federal funds rate low, now might be the time to “think about thinking about tapering our $120 billion in monthly Treasury bond and mortgage-backed securities purchases.”
The prominent Federal Reserve official indicated that he believes the time for the current trajectory has passed and the central banking system could be in trouble if they don’t pump the breaks now:
“I think it is appropriate for us to slowly, carefully move back on our purchases at the appropriate time,” Harker said during an event with Women in Housing and Finance. “When that is, that is something we need to start discussing.”
These comments come on the heels of an economy that is in what the Examiner described as “rapid demand-driven expansion” brought on by the pandemic’s recession.
“This is not something we are going to do suddenly, though,” his speech read. “We need to follow the playbook we had after the Great Recession; that is, start to taper the bond purchases slowly. We will remove accommodation carefully and methodically as the economy continues to strengthen.”
Harker also warned that the economy is at risk to overheat, should the Fed continue with its monetary policies. He also addressed the Fed’s so-called beige book report which takes on inflation and the rise in prices.That report indicated that while the central bank is on target for 2 percent growth, input costs have increased unilaterally in construction and manufacturing raw materials prices.”
Former Treasury Secretary Larry Summers, who served under Presidents Bill Clinton and Barack Obama, recently offered a similar opinion saying that inflation and overheating are now the biggest threat to economic stability — not slow growth and unemployment.
“This is not just conjecture,” Summers recently said. “The consumer price index rose at a 7.5 % annual rate in the first quarter, and inflation expectations jumped at the fastest rate since inflation indexed bonds were introduced a generation ago. Already, consumer prices have risen almost as much as the Fed predicted for the whole year.”