The Fed signals imminent tapering, expects to raise rates in 2022

In breve

The Fed signaled a strong conviction to speed up normalization, explicitly indicating that the November meeting could stage the announcement of the beginning of tapering. Moreover the rate liftoff could already take place in 2022.

Highlights:

  • Despite risks for growth due to bottlenecks, the Fed maintains an optimistic view on the US economy. Conditions are
    ripe for a reduction in asset purchases that could be announced as early as in the November meeting. Net asset purchases should then get to zero by mid-2022.
  • The prospects of sustained employment gains and concerns about inflation expectations moved the “dots” for 2022 towards one rate hike, but the committee is evenly split on that decision. The policy rate is expected to climb to 1.75% by the end of 2024.
  • Growth projections for 2021 were revised down and that for inflation sizeably up, to account for the impact of the supply chain disruptions, but the Fed reiterates its belief that the problems are temporary.

     

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The Fed signals imminent tapering, expects to raise rates in 2022
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