The US Federal Reserve officials have decided to taper their asset-buying programme earlier to battle surging inflation. The central bank also signalled that it would favour hiking interest rates in 2022 at a faster pace than previously anticipated. It said that it would double the pace of the tapering and planned to end the programme by early 2022, much earlier than mid-year as initially planned. The Fed also signals that it could make three quarter-point increases in its federal funds rate next year, after holding borrowing costs near zero since March last year.
This means that the Fed would end its supportive policy despite persisting risks from the new coronavirus Omicron variant. As early as September, Fed officials were evenly divided on the need for any rate hikes at all in 2022. Now, policymakers see the fund rates could be hiked gradually to 2.1% by the end of 2024. The Federal Open Market Committee said in a statement that the course reversal reflects the further improvement in the labour market and inflation developments.
Consumer prices increased 6.8% year-on-year in November. That marked the fastest inflation since 1982 thanks to surging prices of food and energy. Unemployment fell to 4.2% last month from 4.6% in October. The FOMC revised its median projection for 2022 inflation from 2.2% to 2.6%. It now predicts the unemployment rate at 3.5% by the end of 2022, compared to its previous forecast of 3.8%.
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Published on December 16, 2021 10:45 AM (GMT+8)Last Updated on December 16, 2021 10:45 AM (GMT+8)
