Fed’s Bostic says tapering will be gradual, and that central bank is watching progress of delta variant

Bostic also said that he gets paid to worry about inflation, which has become a hotter issue for markets in the economic-recovery phase of the COVID-19 pandemic, which has featured surging demand and supply-chain bottlenecks.

The Atlanta Fed boss’s comments came about an hour after minutes from the Fed’s June 15-16 meeting were released. Minutes showed that the central bank broached the subject of eventually scaling back on monthly purchases of $80 billion in Treasurys and $40 billion in mortgage-backed securities.

“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data,” according to the minutes.  

Last month, Bostic said that he saw the economy reaching criteria imposed by the Fed of “substantial progress” required for it to begin dialing back its accommodations, with an eye toward lifting interest rates by late 2022.

In his comments to the NABJ on Wednesday, Bostic declined to discuss the timing of eventually increasing rates, which currently stand at a range between 0% and 0.25%.

However, he said that the Fed was paying attention to the troubling delta variant of COVID-19, which he cautioned could slow the U.S. recovery, causing consumers to pull back and hamstring economic reopenings that are gaining stride.

The delta variant is now the most dominant form of SARS-CoV-2 in the U.S., according to new data from the Centers for Disease Control and Prevention, and its spread was one factor attributed to buying in government debt that was driving the 10-year TMUBMUSD10Y, 1.311% and 30-year Treasurys TMUBMUSD30Y, 1.930% to their lowest yields since February.

Still, stocks mostly shrugged, with the S&P 500 index SPX, +0.34% and the Nasdaq Composite COMP, +0.01% registering record closes Wednesday, amid the slump in yields.