Fed's Bullard says 'it's too early to talk taper' while the pandemic continues

St. Louis Federal Reserve President James Bullard acknowledged the progress the economy has made but said Tuesday it’s still not time to ease back the throttle on policy.

In an interview on CNBC’s “Closing Bell,” the central bank official said fiscal and monetary policy help as well as aggressive vaccination efforts have helped keep growth going since the Covid-19 pandemic began in March 2020.

But he added that even with rising inflation ahead, the Fed should stay accommodative in its policy stance until there are clearer signs that the virus no longer poses as major a threat. That includes keeping short-term borrowing rates anchored near zero and continuing to buy at least $120 billion a month even as markets wonder when the Fed will start pulling back on those purchases.

“I think it’s too early to talk taper here,” Bullard said on “Closing Bell,” using the market’s term for when the pace of purchases will slow. “We’re going to let the chair [Jerome Powell} open that discussion when he thinks it’s appropriate.”

Thus far, Powell, Bullard and virtually every other policymaker at the Fed have spoken in unison about keeping ultra-easy policy intact.

The Fed has a goal of getting the economy back to full and inclusive employment and has pledged not to implement preventive rate hikes even if inflation creeps above the central bank’s 2% goal.

Earlier in the day, investor Stanley Druckenmiller harshly criticized the Fed for keeping policy too loose amid the recovery, and said the central bank was risking the dollar’s global standing as the primary reserve currency.

Bullard said the response was appropriate and continues to be as the pandemic impacts the economy.

“I don’t know how many pandemics Stan has lived through. These don’t come along that often,” Bullard said.

“We’re not quite out of the pandemic yet,” he added. “Once we get out of the pandemic, then I think it will be time to look at whether monetary policy can change.”

Before starting to tighten policy, Bullard said he will need to see more signs that the virus is losing its grip.

“I’d like to get out of the pandemic more solidly than we are today,” he said. “So, I’d like to see those metrics, fatalities per day and confirmed cases, go even lower than where they are. I’d like the CDC to come out and tell us they’re more comfortable than they have been.”

“So, we’ll see if we can get to that point, but I don’t think you really want to change policy while you’re still in the pandemic tunnel. Even though you can sort of see the end of the tunnel, we’re not there yet, and we’ve got to push hard till we get all the way to the end.”

Bullard echoed comments from other Fed officials that inflation likely will rise this year but only on a temporary basis. On the jobs front, he said hiring looks good but it’s too early to expect a full recovery.