Richmond Federal Reserve President Thomas Barkin said Friday he was on board to cut back economic aid from the central bank as concerns about inflation mount.
With the Fed saying it will likely pull out of its monthly bond purchases, Barkin said that seems reasonable and he tends to begin the process in November. Minutes of the September Fed meeting indicate that officials want to start cutting either next month or in December.
"If at the next meeting we decide to shorten the expiry, we will surely have a discussion about which of these two dates, and my instinct would be if you decide, go ahead and get moving." "He said CNBC's Steve Liesman during a live interview with the Squawk Box. "But I will definitely be open to debate on both sides."
Fed officials have said they have hit their 2% inflation target, despite the fact that the full employment mandate is difficult to pin down despite significant progress.
Like many of his colleagues, Barkin pointed to temporary factors such as supply chain problems that drove car prices up, as the main driver behind inflation, which is hitting around a 30-year high.
But he also admitted it was a bigger problem than he expected.
"I think there is risk on the inflation side and I am watching it very closely," he said.
The logs showed that the pace of bond purchases is likely to slow by about $ 15 billion each month – $ 10 billion in government bonds and $ 5 billion in mortgage-backed securities.
Fed officials have stressed that even after tapering begins, it will be some time before rate hikes begin. Market prices are currently for the first hike in July 2022, with another likely before the end of the year, according to the CME's FedWatch tracker.
Barkin said he will base his rate decision on two factors – whether inflation will stay high or return to its normal level of around 1.5-2% for the past 25 years or so, and how close the labor market is to full employment.
"Will the labor market be this tight in the next six months? Will inflation go down or not?" he said. "Different answers to these questions in my head would lead me to different points of view as to when to start increasing rates."
He was also asked about his position on whether Fed officials should be allowed to own individual stocks, but declined to respond pending an investigation into best practices by Chairman Jerome Powell. Several officials have come under fire over the stock trading and two regional presidents have resigned after controversy over their activities.
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