The central bank said it will start reducing its $120 billion in monthly bond purchases in the coming weeks.
The Federal Reserve will begin dialing back the extraordinary economic aid it has provided since the pandemic erupted in early 2020, a response to high inflation that now looks likely to persist longer than it did just a few months ago. As expected, the central bank left rates unchanged. In a statement Wednesday after its latest policy meeting, the Fed said it will start reducing its $120 billion in monthly bond purchases in the coming weeks by about $15 billion a month, though it reserved the right to change the pace of tapering. Those purchases have been intended to hold down long-term interest rates to encourage borrowing and spending. With the economy recovering, that’s no longer needed. Much watched among investors and economists were the Fed’s comments about inflation, which Fed Chair Jerome Powell has consistently described as « transitory. » Yet the consumer price index — which measures the cost of items such as housing and cars — has been elevated since April, with inflation hovering between 4% to 5%. Many economists expect the supply-chain bottlenecks contributing to. But the Fed on Wednesday maintained its stance that inflation is « transitory, » although it slightly softened that view. « The statement does add a little more to the inflation assessment, but the language is still surprisingly dovish, » Paul Ashworth, chief U.
