The Federal Reserve on Wednesday will provide its final update for the year on its easy money policies, with all signs pointing to a quicker draw down of its pandemic-era stimulus.
Policymakers will likely point to higher inflationary prints to justify a speedier “taper” of its asset purchase program.
Since the depths of the pandemic, the Fed has added trillions in U.S. Treasuries and agency mortgage-backed securities to its balance sheet, part of an effort to signal to markets its intention to keep financing conditions easy. In November, the Fed charted a course for slowing those purchases that would bring the entire program to a full stop by the middle of next year.
But with inflation clocking in at 6.8% on a year-over-year basis, Fed officials now see a case for hastening that taper and ending the program earlier.
That would give the Fed the optionality to move earlier — and perhaps more aggressively — on raising interest rates next year. At the conclusion of Wednesday’s meeting, the Fed will release a new set of “dot plot” projections mapping out policymakers’ expectations for where interest rates will be in the coming years.
The Federal Open Market Committee will release its policy statement at 2 p.m. ET with Fed Chairman Jerome Powell’s press conference at 2:30 p.m. ET.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
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