US Federal Reserve to Start Slashing Pandemic Stimulus Package – As Happened | Business


Failure to commit to a specific reduction schedule has given the Fed some flexibility to adjust the pace of purchases in 2022, allowing for an accelerated reduction if inflation turns out to be more rigid than expected, although the The adjustment can occur in either direction. “

“With the announcement of the policy meeting expectations, attention is now on the question of what this means for key rates. At the Jackson Hole summit in August, Fed Chairman Jerome Powell explicitly recognized two different tests for tapering and rate hikes, severing the link between the two. But as inflation has been surprisingly on the rise since then, the Fed’s thinking must have shifted towards a higher probability of an earlier take-off, potentially starting as soon as QE ends. “

“Powell – unsurprisingly – did not commit to a rate hike schedule at the press conference, stressing the reliance on data, the Fed’s emphasis on risk management and the need for a option to address a range of possible outcomes. With inflation and labor market cut-offs having been crossed, when it comes to raising interest rates, the tolerance for progress in both areas under the FACT remains uncertain. This leaves plenty of room for interpretation, potentially allowing markets to conduct their own narratives until further clarification of the Fed’s reaction function emerges. “


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