Fed's Harker says he doesn't expect to taper bond purchases until late 2021, early 2022

(Reuters) - The Federal Reserve may not pare back its bond purchases until the end of this year at the earliest, Philadelphia Federal Reserve Bank President Patrick Harker said on Thursday.

Policymakers agreed in December to keep purchasing $120 billion in bonds a month to support the economy and they could disrupt markets if they reduce their bond purchases too soon, Harker said.

“I don’t see us paring that back right now, or in the near future,” Harker said during a question-and-answer session of a virtual event organized by the Philadelphia Business Journal. “I could see potentially that occurring at the very end of 2021 or early 2022, but it is all going to depend on the course of the economy which will depend on the course of the virus.”

The U.S. economy is still being shaped by the coronavirus, and growth could possibly turn negative in the first quarter of 2021, Harker said.

With coronavirus cases on the rise since September, Harker said he expects the economy to show “modest growth” in the fourth quarter of 2020, “before a significant slowing” in the first quarter of this year.

Vaccinations and the recently passed $900 billion fiscal package should help growth pick up later this year, Harker said.

Still, he said the pace of vaccinations in the United States “has been incredibly disappointing so far.” Fewer than 5 million people, or less than 2 percent of the population, have received the first dose of vaccines, he said.

In the meantime, there are no signs that “inflation is going to go out of control” and the Fed will keep rates near zero to support the economy, Harker said.

“We are looking at a long period where the Fed funds rate will stay at essentially zero,” Harker said.

Reporting by Jonnelle Marte; Editing by Andrea Ricci and Jonathan Oatis