Fed’s Robert Kaplan says he wants taper to start ‘soon,’ be gradual

Federal Reserve Bank of Dallas President Robert Kaplan said Wednesday he would like the Fed to start reducing its support for the economy before the end of the year, in part to make an abrupt policy tightening less likely later on.

“I would prefer sooner” than the end of the year for reducing the Fed’s pace of asset purchases, Kaplan said on Bloomberg TV, adding that the taper should be gradual. Supply and demand balances in the labor market will likely persist, making “explosive” growth in jobs unlikely, he said, though he expects “continued improvement” in the labor market.

And while inflation will step down to 2.4% next year from 3.5% this year, he said, it will likely be felt more broadly.

“I’d like to manage the risk, because there is uncertainty, and upside risk” to his inflation forecast, he said. “I’d be on my front foot in being very ready to take action sooner because I worry about the efficacy and some of the side effects of these purchases.”