Within seven months, the Fed could end the stimulus. It stresses that inflation is temporary – monetary policy

Members of the Federal Reserve’s Federal Open Market Committee (FOMC), at the US central bank’s monetary policy meeting on September 21-22, indicated the possibility of a gradual withdrawal of stimulus to the economy — called “tapping,” which includes debt purchases — starting in mid-November or mid December. The idea is to have the program completed by the middle of next year.

The current stimulus program includes the purchase of assets equivalent to 120 billion dollars a month. These amounts are divided each month into $80 billion in Treasuries and $40 billion in mortgage-backed securities.

According to the minutes of the last meeting, members of the Federal Open Market Committee broadly agreed on the idea that they should start reducing the emergency pandemic support given to the economy, with this “decreasing” starting in mid-November or mid-December, “even if the delta version of Covid is still -19 creates obstacles.”

The Fed members stressed that if the next monetary policy meeting, which will be held on November 2 and 3, it was decided that the withdrawal of stimulus could begin, then the process could begin in mid-November or mid-December.

In addition to the “participants [na reunião] They considered that, given that the economic recovery is still in the pipeline in general, it would be appropriate to complete the process of “tapping” by the middle of next year”, minute detection Released on Wednesday.

US central bank officials also discussed the potential quantitative path of “tapering,” noting a monthly decline of $10 billion in Treasury purchases and $5 billion in the case of mortgage-backed securities.

Inflation: continues to rise but is fleeting

As for inflation, which has been rising at a rapid pace — in September it was at its highest level in the past 13 years, at 5.4% — some Fed officials suggested disruptions in supply and production chains could keep pressure on prices longer than expected. However, they reaffirmed its temporary nature.

Last month, Federal Reserve officials estimated that inflationary pressures would ease next year, with inflation falling to close to the central bank’s 2% target.

As for the fed funds rate, 9 of the 18 FOMC members at the September meeting predicted that key interest rates could rise at least once in 2022 (compared to only seven who saw that possibility at the June meeting).

In September, the Federal Open Market Committee kept interest rates between 0% and 0.25%, after indicating that they would remain at this level until the labor market reaches full employment and inflation is more controlled (it may be, “for some time,” above 2 %).

At this latest Fed meeting, a “point chart” – a map showing how each central bank representative estimates changes in key interest rates – showed that half of Fed members now expect a rate hike next year.

In addition, all but one of the members anticipate at least one key rate increase by the end of 2023, and of those, 13 anticipate two increases through 2022.