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Fed to kick off faster tapering plan from January

by Mike Robinson

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© Reuters. FILE PHOTO: Federal Reserve Chair Jerome Powell listens as U.S. President Joe Biden nominates him for a second four-year term in the Eisenhower Executive Office Building’s South Court Auditorium at the White House in Washington, U.S., November 22, 2021.

LONDON, (Reuters) – The U.S. Federal Reserve is likely to double its pace for tapering monthly bond purchases, from January, to $30 billion. It will also wind down its pandemic-era bonds buying scheme by mid March, Goldman Sachs strategists stated in a daily note.

Jan Hatzius’ client note stated that the Fed is more open to speeding up the taper rate because of higher inflation than expected over the past 2 months. Also, it shows greater trust among Fed officials about the fact that an earlier pace will not shock the financial markets.

Goldman anticipates that the Fed will begin raising interest rates in June despite its accelerated tapering plan. This is for a total three time increase of the Fed’s rate over 2022. One of several U.S. banks that have increased their expectations of interest rate increases in 2022 from two to three is the U.S. Investment Bank.

Minutes from the November 2-3 central bank policy meeting revealed that a variety of policymakers stated they would speed up their taper programme of bond-buying if inflation is high and will move quicker to increase rates.

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