Fed’s Evans: Taper to take until mid-2022 to complete

Charles L. Evans, the chief executive officer of the Federal Reserve Bank of Chicago crossed wires, via Reuters, amid early Thursday morning in Asia. The policymaker sounds cautiously optimistic while saying, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.”

Additional comments

We're going to be looking to see how much additional accommodation is boosting inflation.

If indeed that is the case, we'll be thinking about when the right time to start raising rates will be.

Then at some point we'll let the balance sheet's maturing assets roll off so that we get the size of the balance sheet back down south of where we are.

Gasoline prices are hitting household budgets, will be an economic headwind.

On the other hand, the stock market is high, financial conditions are good. 

Optimistic will have a vibrant labor market in 2022.

Looking for inflationary pressures to recede, will be monitoring this well in the middle of 2022.

Would not be surprised if the unemployment rate is 4.5% by the end of 2021.

Had expected a more resilient supply chain than what we have seen.

FX implications

The Fed policymaker’s mixed comments weigh on the market sentiment and dragged the US equities down, also keeping the Treasury yields pressured, following the release.

Read: US 10-year Treasury yield pulls back below 1.60% after earlier hitting three week highs at 1.65%