The Fed Speaks Loudly but Carries a Feather

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"Speak softly and carry a big stick" President Theodore Roosevelt on foreign policy.

In other words, let your actions, not your words set the tone.

The Fed is taking the opposite tack. Many Fed members are vocal about tapering soon, but the Fed has not backed their words with action.

Might the Fed be speaking loudly but carrying a feather?

Expectations for the Fed to turn "hawkish" and announce a tapering schedule at the next meeting or two are high. A recent Wall Street Journal article hinted at an announcement at the September 2021 meeting and tapering in November. The solid economic recovery, coupled with gains in employment and a higher-than-target inflation rate, supports such an action.

The Wall Street Journal timetable is correct. However, an analysis of the composition of the Fed by voting status and their degree of influence leads me to keep an open mind.

Hawkish winds are blowing

The quotes below from various Fed members speak to a sense of urgency to begin tapering QE.

  • "It would be my view that if the economy unfolds between now and our September meeting ... if it unfolds the way I expect, I would be in favor of announcing a plan at the September meeting and beginning tapering in October," Robert Kaplan Dallas Fed August 2021
  • "My preference would be to get to a decision in September and start sometime after that," Bullard told reporters on Friday after giving a virtual speech. "My main goal would be to get done by the end of the first quarter."– James Bullard St. Louis Fed per Bloomberg July 2021
  • "We should go early and go fast, in order to make sure we're in position to raise rates in 2022, if we have to," Fed governor Christopher Waller August 2021
  • "Philadelphia Federal Reserve Bank President Patrick Harker said on Friday that he still supports tapering the central bank's asset purchases sooner rather than later." Reuters- August 2021
  • "Fed’s Bostic Urges Faster Bond Taper as Economy Strengthens” Bloomberg August 2021
  • "I'm less precise about amounts and dates, and really more focused on saying: Sooner rather than later," Esther George Kansas City Fed August 2021