Bye…BYE cheap money borrowing rates….
Federal Reserve policymakers said they will cut back on their stimulus more quickly at a moment of rapid inflation and strong economic growth, capping a challenging year with a pronounced policy pivot that could usher in higher interest rates in 2022.
Central bank officials released a policy statement and a fresh set of economic projections at the conclusion of their two-day meeting. The statement showed that officials decided to slow the monthly bond-buying that they had been using throughout the pandemic to keep money chugging through markets and to bolster growth more rapidly.
Officials are slashing their purchases by twice as much as they had announced last month, a pace that would put them on track to end the program altogether in March. That decision came “in light of inflation developments and the further improvement in the labor market,” according to the policy statement.
Speeding up the end of the Fed’s bond-buying will position the central bank to more promptly raise its policy interest rate — a more traditional and more powerful tool — if officials decide that doing so is necessary to keep inflation under control. The Fed’s economic projections suggested that officials expected to make three interest rate increases next year….
While officials spent much of the year laying out a patient path for winding down their pandemic-era help for the economy, they have turned more proactive in recent weeks as they have become more worried that a burst in inflation this year could linger. The Fed is supposed to keep prices stable while fostering a strong labor market, and those two goals are increasingly in tension….
image of current Fed Chair Powell and Treasury Sec Yellin who had his job before him….Sarahbeth Maney/The New York Times