- St. Louis Fed President James Bullard says the central bank should have its tapering process finished by the end of March 2022.
- At that point, we'll see "whether inflation has moderated," he said. "If it hasn't moderated, we're going to have to be more aggressive to contain inflation."
- Bullard, who spoke from the Fed's annual Jackson Hole conference, said there's some evidence the Fed's bond-buying blitz has started to create bubbles in the U.S. housing market.
St. Louis Federal Reserve President James Bullard said Thursday that the central bank should begin curbing its monthly stimulus efforts soon and have the process wrapped up by the end of March to prevent the U.S. economy from overheating.
Many Fed leaders believe the central bank should reduce the pace of its monthly purchases of $120 billion in Treasury bonds and mortgage-backed securities in a process known as tapering.
Bullard said the Fed's purchases were appropriate in 2020 to support American business through the Covid-19 pandemic, but they now run the risk of creating bubbles in financial markets and runaway inflation.
"We do have a new framework we did say that we would allow inflation to run above target for some time, but not this much above target," Bullard said of recent price increases in the U.S. economy.
"So for that reason I think we want to get going on taper. Get the taper finished by the end of the first quarter next year," he continued. "And then we can evaluate what the situation is and we'll be able to see at that point whether inflation has moderated and if that's the case we'll be in great shape. If it hasn't moderated, we're going to have to be more aggressive to contain inflation."
Bullard, who spoke with CNBC's Steve Liesman for an interview that aired on "Squawk Box," said there's some evidence that the Fed's bond-buying blitz has started to create bubbles in the U.S. housing market.
"I think that there is worry that we're doing more damage than helping with the asset purchases because there is an incipient housing bubble in the U.S. The median house price, at least the number I saw, was approaching $400,000," he said. "We got into a lot of trouble in the mid-2000s by being too complacent about housing prices, so I think we want to be very careful on that this time around."
Officials have set the standard of "substantial further progress" as the point at which they will consider tightening monetary policy that includes benchmark interest rates being held near zero.
Bullard spoke as part of the Fed's annual Jackson Hole conference, which is virtual in 2021 to protect against the spread of Covid-19. The yield on the benchmark 10-year Treasury note last traded at 1.358%.
Central bank leaders use the summit to discuss the current of the U.S. economy and how monetary policy could be adjusted. This year likely will feature significant debate over when to begin tapering.
Bullard is known as a "hawk" among central bank officials, meaning he tends to be more apt to pursue higher interest rates and curb easy policy sooner than his peers. He is not a voting member on the Fed's policymaking committee in 2021, but will be in 2022.
Reducing the minimum $120 billion a month in bond purchases is the first step in the tightening process. The Fed would later move to increase interest rates.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign up to start a free trial today.