NEW YORK (Reuters) – The Federal Reserve on Wednesday cleared the way to reduce its monthly bond purchases “soon” and signaled interest rate increases may follow more quickly than expected, with nine of 18 U.S. central bank policymakers projecting borrowing costs will need to rise in 2022.

These actions were part of the Fed’s most recent policy statement as well as separate economic projections. They represent a hawkish bias by a central banking that expects inflation to rise this year at 4.2%. This is more than twice its target rate and it is positioning itself against it.

At 0% to 0.25%, the current target rate for interest was maintained.

The Fed Chair Jerome Powell, will speak at the news conference at 2:20 p.m. GMT (1830 GMT).

STORY:

STATEMENT:

ECONOMIC FORECASTS

MARKET REACTION:

STOCKS: The extended a rally and was last up 1.38%

BONDS: The edged up to 1.3074% and the 2-year yield rose to 0.2221%

FOREX: The slipped 0.16%

COMMENTS:

TOM GARRETSON, SENIOR PORTFOLIO STRATEGIST, RBC WEALTH MANAGEMENT, MINNEAPOLIS

“Across the board it’s exactly what we were expecting, the Fed took another step towards a formal taper announcement, and that’s probably going to come at the next meeting or two.

The Fed’s improvement in their inflation outlook was key to the possible rate increase. Although there are some signs that inflationary pressures will be temporary, they remain much longer than anticipated. That’s the key driver as to why the balance has shifted to a potential rate hike in 2022 as opposed to 2023.

“We’re watching yield curves flatten. The Treasury market’s interpreting it as a hawkish surprise.

It was in line with our expectations. Powell will be using the press conference as an opportunity to reiterate the notion that tapering will occur in the coming months. It’s what I expected, not too hawkish and not too dovish.”

JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK

“Unless we know who is who, which we don’t, I’m not sure the dot-plot accurately reflects the Fed’s thinking. I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year.”