(Reuters) – Federal Reserve Governor Randal Quarles on Wednesday said that while it’s time for the Fed to begin dialing down its bond-buying program, it would be “premature” to start raising interest rates in the face of high inflation that is likely to recede next year.

The Fed had promised in December to keep buying $120 billion in Treasuries and mortgage-backed securities each month until the economy had made “substantial further progress” toward its goals of 2% inflation and maximum employment.

Since then, the U.S. unemployment rate has dropped nearly two percentage points to 4.8%, and consumer price inflation has registered above 5% for four straight months.

“It is clear that we have met the test of substantial further progress toward both our employment and our inflation mandates, and I would support a decision at our November meeting to start reducing these purchases and complete that process by the middle of next year,” Quarles said in remarks prepared for delivery to the Milken Institute.

Economic growth, after slowing last quarter amid a surge in COVID-19 cases, will be strong for the rest of this year and next, he predicted. Demand for labor continues to far outpace the supply, pushing upward on wages he said; and supply chain bottlenecks have disrupted production and distribution, pushing upward on prices.

But though these factors have pushed inflation far above the Fed’s target, they are likely to recede next year, he said. The sharpest price rises are in specific sectors and items most affected by COVID-related shortages. Expectations for inflation remain anchored at around 2%.

All that, he said, means “I do not see the (Fed) as behind the curve” on fighting inflation. To the contrary, he said, “constraining demand now, to bring it into line with a transiently interrupted supply, would be premature.”

The Fed can remain patient with policy to allow the labor market more time to recover, he said. Should inflation, contrary to the view held widely among Fed policymakers, stay elevated next year, “I am confident that the monetary policy tools at our disposal can bring inflation down toward our 2% goal,” he said.

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