Central bank may act sooner than previously planned to dial back low-interest-rate policies that helped fuel a swift rebound from pandemic recession
The Federal Reserve have signaled that the central may act sooner than previously planned to start dialing back the low-interest-rate policies that have helped fuel a swift rebound from the pandemic recession but have also coincided with rising inflation. At a news conference, Chair Jerome Powell said the Fed’s policymaking committee discussed when to hike key rates the Fed controls and when to reduce its monthly bond purchases. The purchases, which consist of $120 billion in Treasury and mortgage bonds, are intended to keep longer-term rates low to encourage borrowing. Here is what this news may mean… Q. What will the Fed do when it acts? A. The Fed has made clear that its first step in slowing its support for the economy will be to pare its bond purchases — and that it would begin to raise rates only sometime after that. Its key rate has been pinned near zero since March 2020. Powell told reporters Wednesday that while reaching policy makers’ goal of “substantial further progress” on their objectives to begin slowing its bond buying was “still a ways off, participants expect that progress will continue.” And when the central bank is ready to signal the start of tapering, it will be very careful, Powell said. “It will be orderly, methodical and transparent,” he said.
