The Federal Reserve has sent a clear signal that the era of rock-bottom interest rates will end in 2022.
WASHINGTON — America’s inflation spikes have prompted the Federal Reserve to pick up the pace in normalizing its pandemic-era monetary policy. On Wednesday, the central bank said it will wrap up its stimulus program faster than originally announced, and its updated economic projections show multiple interest rate increases in 2022. The central bank, which first announced in November that it was “tapering” its monthly asset purchases, said Wednesday that it will do so at a quicker pace. Starting in January, the Fed will cut its monthly purchases of Treasury securities by $20 billion and cut its monthly mortage-backed securities buys by $10 billion. That leaves the purchases at $40 billion for Treasury securities and $20 billion for mortgage-backed securities each month. That’s consistent with what Federal Reserve Chairman Jerome Powell told Congress in late November. At this pace, the Fed is another two meetings away from completing the wind down of the stimulus, Powell told reporters during Wednesday’s press conference. The Fed’s next two meetings will be in January and March. But the central bank also reserves the right to change the pace of monthly purchases again if the economic outlook demands it, Wednesday’s statement said.
