MNI BRIEF: Fed's Waller Prefers Avoiding Taper, Hike Overlap

Federal Reserve Governor Christopher Waller said Friday that if inflation does remain higher for longer his preferred response would be a faster taper, possibly in January, to bring forward rate hikes, and not hiking rates in a way that would suddenly abruptly stop the taper or overlap with continued asset purchases.

"Just from a conceptual level, if you are still buying assets to put more accommodation and then start raising rates, they don't seem to line up. Now, from that point of view, I would just assume end the taper," he said during a virtual Q&A. "If we just went cold turkey and said we're stopping [the taper] that might be a shock to the markets, I'm sure it would be. But we can get ahead of it in sort of accelerating the taper which is more my preference."

"If we were to, like in January, if you do kind of the math, if you double the pace of tapering in January, you could be done by the beginning of April and then that brings you three quarters of policy space for 2022 should you need it. I'm not saying we have to but if you got the taper done, you could have a rate hike as early as the second quarter," he said.