Philadelphia Fed President Patrick Harker said in a Nikkei interview that he’d like to start tapering asset purchases. He sees “elevated risk” of inflation running higher.

He said, “my baseline forecast is still to have inflation around 4% this year, ending this year, and then starting to fall back to 2% over the years 2022 and 2023. However, I do see elevated risk that inflation could run higher”.

“I’d like to start the taper process soon, so that we can finish the tapering process, so if we need to increase the policy rate, we have the room to do that. And I think we need to buy ourselves that option,” he added.

Fed Governor Michelle Bowman said yesterday, “even though some of the recent data may have been less strong than we expected, we are still looking at very robust economic growth.”

“If the data comes in as I expect that it will, it will likely be appropriate for us to begin the process of scaling back our asset purchases this year,” she added.

“It is important not to take too much signal from a single data point as we might have seen last week from the labor market,” Bowman said.

Atlanta President Raphael Bostic “as strong as the data was coming in the early part of the summer, I was really very much leaning into advocating for an earlier start than what many may have expected”.

However, “the weaker data that we’ve seen more recently suggests to me that maybe there’s a chance for some play on this, but I still think that sometime this year is going to be appropriate” to taper.

In the Beige Book economic report, Fed said that “economic growth downshifted slightly to a moderate pace in early July through August”. The deceleration in activity was “largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions.” Other sectors were “constrained by supply disruptions and labor shortages, as opposed to softening demand”

All Districts continued to report “rising employment overall”. All Districts noted “extensive labor shortages that were constraining employment”. A number of Districts reported an “acceleration in wages”, with several noted “particularly brisk wage gains among lower-wage workers”. Inflation was “steady at a elevated pace”. Several Districts indicated that businesses anticipate “significant hikes in their selling prices in the months ahead”.

Full Beige Book here.

New York Fed President John Williams said, “assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year.” He added, “I will be carefully assessing the incoming data on the labor market and what it means for the economic outlook, as well as assessing risks such as the effects of the delta variant.”

“I think it’s clear that we have made substantial further progress on achieving our inflation goal,” Williams said. “There has also been very good progress toward maximum employment, but I will want to see more improvement before I am ready to declare the test of substantial further progress being met.”