MNI BRIEF: Fed's Kaplan Says Delta Covid Could Push Back Taper

Dallas Federal Reserve President Robert Kaplan said on Friday he was watching carefully for any economic impact from the Delta variant of the coronavirus and might need to adjust his views on tapering should it slow economic growth.

The "big caveat" is the Delta variant and if it turns out to be persistent enough or unfold differently as it has in some countries to affect demand, in which case it could impact the decision when to taper, he said. "I've got to take that into account, and will adjust my views accordingly. We've got a month between now and the next FOMC meeting, and it's a good thing we've got a month to see how this all unfolds because I don't know. I've got to be open minded and I will be."

"If the economy unfolds as I expect, I'd be thinking about the possibility of announcing something in September and starting in October," said Kaplan at an event with the Texas Tech University Rawls College of Business. The Dallas Fed chief sees GDP growth at 6.5% this year, unemployment ending the year at 4.5%, and PCE inflation ending the year at 3.8-3.9% and could end 2022 at 2.5% with risks to the upside.