Fed set to begin pulling plug on massive aid to economy
The Federal Reserve said Wednesday it will begin to slow its massive bond purchases later this month, the first step in removing its extraordinary pandemic-era support for the economy.
The long-awaited move signals both optimism about the pace of job growth and wariness about price surges that have pushed inflation up to its highest level in decades. The central bank has been buying $120 billion a month in U.S. government debt and mortgage-backed securities, a process designed to supercharge its efforts to keep borrowing costs low for households and businesses.
But some investors and lawmakers have warned that the central bank’s vast purchases are feeding financial bubbles in the housing, stock and even cryptocurrency markets, and stoking higher consumer prices.
Fed Chair Jerome Powell has said that its bond buys could cease entirely by the middle of next year, at which time they could choose to deploy a more powerful tool for fighting inflation: raising short-term interest rates. The central bank has not yet clearly signaled when it will take that step. It left interest rates unchanged Wednesday near zero.
The central bank’s policymaking committee in a statement after meetings this week said it still expects inflation to slow as the economy emerges from the pandemic but acknowledged that production and shipping delays “have contributed to sizable price increases in some sectors.”
This is not a CAPTIS article. Originally, it was published here.