US Federal Reserve officials intensified their battle against the hottest inflation in a generation by shifting to an earlier end of their asset-buying programme and signalling they favour raising interest rates in 2022 at a faster pace.
Heralding one of the most hawkish policy pivots in years, the central bank said on Wednesday it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to $30-billion a month, putting it on track to conclude the programme in early 2022.
The faster pullback puts Fed Chair Jerome Powell in position to raise rates earlier than previously expected to counter price pressures if necessary, even as the pandemic poses an ongoing challenge to the economic recovery. The Fed flagged concerns over the Omicron strain, saying that “risks to the economic outlook remain”.
Projections published alongside the statement showed officials expect three quarter-point increases in the benchmark rate will be appropriate next year, according to the median estimate, after holding borrowing costs near zero since March 2020.
