Fed Doubles Rate of Tapering, Poises for Rake Hikes Early 2022 as Inflation Soars

Bond indices

The Federal Reserve announced a move to quickly pare back its bond-buying policy as officials become worried about the persistence of inflationary pressures.

Source: Federal Reserve

DXY down -0.11%, EUR USD up +0.19%

On Wednesday, the policy-setting Federal Open Market Committee stated it would double the rate of winding up of its asset purchase program.

The FOMC also indicated a strong possibility of an interest rate hike next year that would be the first hike since the Fed cut short-term borrowing costs to close to zero in March 2020.

The Fed has added trillions of dollars in US Treasuries and agency mortgage-backed securities (MBS) to indicate its support for financing conditions.

In a statement, FOMC indicated that the committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities.

A quicker taper would allow the Federal Reserve to move quicker and more aggressively on interest rate hikes.


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