Patrick Harker, president of the Philadelphia Fed, said, "it may be time to at least think about reducing our purchases of $120 billion a month in Treasuries and mortgage-backed securities."

"however, this is not something we will do all of a sudden," Harker said in a speech prepared for the Women in Housing and Finance virtual event on Wednesday.

"We need to follow the script after the Great Recession; that is, start slowly reducing bond purchases. As the economy continues to strengthen, we will carefully and methodically cancel policy easing.

"as the economy continues to reopen, I expect job creation to increase in the coming months. Given the current trajectory, I expect the labour force to return to its pre-epidemic trend sometime next summer-in other words, it will take some time.

Given the economic recovery and so much fiscal support and monetary easing, there are some upside risks to inflation. We will continue to follow closely. But for now, I expect headline inflation to be close to 3% in 2021.