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The Fed assumes itself as a hawk.  It doubles the rate of tapering and raises interest rates six times by the end of 2023 - Monetary Policy

The Fed assumes itself as a hawk. It doubles the rate of tapering and raises interest rates six times by the end of 2023 – Monetary Policy

The Federal Reserve led by Jerome Powell (pictured), announced today, at the end of their two-day meeting, which will double the monthly declining pace of asset purchases, from the current cut of $15 billion per month to $30 billion.

It should be remembered that as part of the stimulus to the economy during the pandemic, the Federal Reserve began spending billions of dollars on asset purchases, in the meantime reducing them to $120 billion per month. In November and December, it stopped investing $30 billion in these purchases (15 billion each month), so the pace of asset purchases it went into in 2022 was at $90 billion per month: $60 billion in Treasuries (OT) and 30 $1 billion in mortgage-backed securities.

At last month’s meeting, she said she would start reducing asset purchases by $15 billion per month, but today, as expected, due to persistent inflation, announced a doubling of the “taper” pace.

That $30 billion reduction in monthly asset purchases, taking effect in January, breaks down into $20 billion for OT and $10 billion for mortgage-backed securities.

So, starting in January, the Fed will buy just $40 billion per month in OT and $20 billion in mortgage-backed securities, according to the statement.

“The FOMC is of the opinion that it should be appropriate to make similar reductions in the pace of asset purchases each month, but is prepared to adjust that pace if justified by changes in the economic outlook,” he says. document.

In what has been one of the most difficult changes in Fed policy in recent years, the central bank expects, with this acceleration, to end the pandemic stimulus program in March rather than in June next year.

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The FOMC remains committed to achieving full employment and achieving an inflation rate of 2% over the long term. Since the rise in the CPI was continuing, the central bank opted for a more “tough” stance.

In this two-day meeting devoted to monetary policy, the Fed decided not to change its key interest rates, thus keeping the fed funds rate between 0% and 0.25%. But it expects three rate hikes in 2022, to 0.9%, and three more the following year.

In addition, a “point chart” – a map showing how each central bank official estimates changes in key interest rates – indicates two additional interest rate increases in 2024. If those eight increases occurred, the Fed funds rate would be at 2.10 % at the end of 2024 (an increase of 25 basis points each time).

Stocks reacted immediately lower, with the consensus of economists pointing to just two interest rate hikes next year. However, Powell said that the US economy will be able to withstand the omicron variable impact of the coronavirus, which brought some optimism to Wall Street and returned the indicators to profits.

Jerome Powell, who spoke after the statement was released, also said that the Fed would not raise interest rates until the “tapping” is over – helping lift stock market sentiment.

(The news was last updated at 20:39)