(Bloomberg) -- The Federal Reserve will likely lift its zero-interest rate policy next year as the impact of the fast-spreading delta variant has not been that significant on the economy, Alan Blinder, a former Fed vice chair, told Japanese wire service Jiji Press.
If the economy keeps recovering, the Fed will likely announce the start of tapering easing policies within two to three months, Jiji on Sunday cited Blinder as predicting. Then, the Fed will gradually reduce the bond purchase amount to zero in eight months, he said.
The Fed has edged closer to winding down its quantitative easing as the U.S. economy recovers. Traders are now eagerly waiting for its symposium in Jackson Hole in Wyoming later this month, with the annual event having been the setting for crucial announcements in the past.
Bond Market Like a Coiled Spring Before Long-Awaited Fed Confab
The Fed will likely start tapering quantitative easing including bond purchases this year, ending in the latter half of 2022, Blinder said. Policy makers are optimistic in predicting that the U.S. inflation rate will be around 2% next year, he said, while adding it's unlikely there will be any large tightening measures immediately as long as the Fed thinks price gains are temporary.
Blinder also said President Joe Biden's $4.5 investment plan in infrastructure and social programs over 10 years isn't huge and won't lead to an overheating economy or soaring prices.
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