The Fed could start tapering bond purchases this year, San Francisco Fed President Mary Daly says

• The Federal Reserve could start slowing down its asset purchases in 2021, San Francisco Fed President Mary Daly told CNBC on Tuesday.
• 'It is appropriate to start talking about tapering,' in light of recovery in the US economy, Daly said.
• Daly said the Fed could start curbing purchases later this year or in early 2022.

The Federal Reserve may begin slowing down asset purchases beginning this year as the world's largest economy continues to strengthen following the recessionary blow suffered during the coronavirus pandemic, San Francisco Fed President Mary Daly said Tuesday on CNBC.

The central bank has been buying $80 billion worth of Treasury securities and $40 billion in mortgage-backed securities since June 2020 in an effort to help the economy recover from COVID-19 crisis.

"It is appropriate to start talking about tapering asset purchases, taking some of the accommodation that we have been providing to the economy down," Daly told CNBC in an interview.

"We'll still be in a very accommodative position with a low funds rate, but we don't need all the tools we see the economy get its own footing," she said. Daly didn't pinpoint an exact timeline but said purchases could be curtailed in late 2021 or early in 2022.

Economic recovery along with a surge in US inflation - and to what extent that it's transitory - has prompted debate in markets over when the Fed will start pulling back on its asset purchases of $120 billion per month.

On Tuesday, government data showed consumer prices rose 0.9% between May and June, much hotter than a 0.5% rate expected by economists in a Bloomberg survey. The CPI climbed to 5.4% in June from the year-earlier period, the highest rate since August 2008.