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The Fed: Fed’s Mester backs taper of bond purchases starting in November

Cleveland Federal Reserve President Loretta Mester said Friday she wants the Fed to start to slow down, or taper, its bond purchases in November and end them sometime before next June.

“Last December, the FOMC issued forward guidance that we would not begin tapering our purchases until substantial further progress had been made toward our goals of maximum employment and price stability.  In my view, the economy has met those conditions, and I support starting to dial back our purchases in November and concluding them over the first half of next year,” Mester said, during a speech to the Ohio Bankers League on Friday.

The Fed has been purchasing $80 billion of Treasurys and $40 billion per month of mortgage-backed securities each month since last summer to hold down long-term interest rates and support the economy.

On Wednesday, Fed Chairman Jerome Powell signaled that the Fed was close to announcing the tapering at its next meeting on Nov. 3.

Mester, who will be a voting member of the Fed’s interest-rate committee next year, said that the start of asset-purchase tapering “should not be taken as a signal that the FOMC plans to raise the fed funds rate any time soon.”

She said she expects the standards the Fed has set for the first rate hike to be met by the end of next year.

U.S. stocks
DJIA,
+1.48%

SPX,
+1.21%

were set to open lower on Friday as bond yields
TMUBMUSD10Y,
1.433%

continued to move higher in the wake of Powell’s press conference on Wednesday.

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