If Delta Hinders the Recovery of the US Economy Hawkish Views will be Fine-Tuned

Robert Kaplan, President of the Federal Reserve Bank of Dallas of the United States, unexpectedly said with reservations that if US economic growth slows sharply due to the Delta virus, he may need to “fine-tune” his monetary policy views.

Kaplan told Fox Business Network that the transmission path of the Delta variant virus is a major economic uncertainty, he further explained: “So far, Delta has not had a substantial impact on consumer activities such as dining out. Due to the fear of infection, it has delayed the time for employees to return to the office and affected the employer’s ability to recruit. It may also affect production output.”

“If Delta has a more negative impact on GDP growth, I might adjust my opinion.” Kaplan added that a “huge economic variable” is the rate at which the U.S. population is vaccinated against the new crown, as well as wearing masks and other virus prevention measures. Way.

Kaplan predicts that the PCE inflation rate at the end of 2021 may be 3.8%-3.9%. He said that extreme inflation may tend to ease, and the PCE inflation rate is expected to be 2.5% in 2022.

On Thursday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, also expressed a similar view.

Kashkari said that the Delta variant virus is very important to his decision to reduce the purchase of debt (Taper), because it will affect the state of the job market recovery, at least it may make him reconsider when Taper should be more patient.

The minutes of the July meeting released by the Fed on Wednesday showed that most officials at the meeting pointed out at the meeting that if the economic recovery is roughly the same as expected, it may be appropriate to start slowing down the pace of debt purchases during the year.

Kaplan was the first official of the Reserve Bureau to release hawkish comments. He has repeatedly stated that the Reserve Bureau talked about adjusting the Quantitative Easing (QE) plan as soon as possible. Last Wednesday, he made a clearer statement that the Fed should announce a plan to reduce the size of its bond purchases (Taper) in September this year and start implementing it in October.