Ending the Fed’s bond purchases sooner would give the central bank room to react to a wider range of economic outcomes next year, Mr. Powell said.
“The data is pretty glaring,” Mr. Turner of UBS said of recent statistics on inflation and employment. “There’s only so much caution you can get away with,” before central banks need to take action, he said.
Omicron has created uncertainty in the face of a strong recovery, Christine Lagarde, the president of the European Central Bank said on Thursday after she outlined how the bank would end its largest pandemic-era stimulus measure.
Vaccine-makers are still testing their shots against Omicron and medical officials are encouraging restraint when it comes to socializing rather than implementing new lockdowns, but central bankers are marching ahead because time isn’t on their side. The effect of monetary policy decisions on the wider economy isn’t immediate.
The Bank of England is forecasting that inflation will peak at 6 percent in April, three times the central bank’s target. Within such a short time frame, there is little policymakers can do to stop that from happening, but they can try to signal to businesses and unions setting wages that they will act to stop higher inflation from becoming entrenched, said Paul Mortimer-Lee, the deputy director of the National Institute of Economic and Social Research in London. This may prevent higher prices from spilling over into significantly higher wages, which could cause businesses to raise prices even more.
While all three central banks are facing similar problems with high inflation and are keeping watch over wage negotiations, their future challenges are different.
The Federal Reserve and Bank of England are worried about the persistence of high inflation. For the European Central Bank, inflation in the medium term is too low, not too high. It is still forecasting inflation to be below its 2 percent target in 2023 and 2024. To help reach that target in coming years, the central bank will increase the size of an older bond-buying program beginning in April, after purchases end in the larger, pandemic-era program. This is to avoid “a brutal transition,” Ms. Lagarde said.