Fed announces start of tapering

HSBC
By November 18, 2021 08:51

Fed announces start of tapering

At its November meeting, the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) left the target range for the federal funds rate at 0.00-0.25%. The Fed maintained its guidance on the policy rate, saying it expects to leave the target range at 0.00-0.25% until conditions are consistent with “maximum employment, and inflation has risen to 2% and is on track to moderately exceed 2% for some time”. More importantly, however, the FOMC announced that it would begin reducing asset purchases this month. The Fed will cut purchases of US Treasuries (USTs) by USD 10bn per month from its current USD 80bn pace, starting in November. Purchases of mortgage-backed securities (MBS) will be lowered by USD 5bn per month from the current USD 40bn pace. Hence, if the Fed sticks to the plan it has set out, purchases will end around the middle of 2022, consistent with the timeline suggested by Chair Powell in the press conference following the September policy meeting. However, this month’s statement also notes that the Committee “is prepared to adjust the pace of purchases if warranted by changes in the economic outlook”. 

HSBC
By November 18, 2021 08:51

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