- Fed expected to announce reduction in asset purchases
- Policy statement due at 2 p.m. EDT (1800 GMT)
- Markets focused on Powell’s news conference
The Federal Reserve on Wednesday is expected to detail plans to end its pandemic-era bond purchases by mid-2022 as policymakers shift their focus towards what, if anything, to do about a surge in inflation that is lasting longer than anticipated.
U.S. central bankers, in the minutes of their Sept. 21-22 meeting, signaled that a “taper” of the $120 billion in monthly asset purchases would be approved at this week’s gathering of the policy-setting Federal Open Market Committee.
What the minutes described as an “illustrative tapering path” would trim the purchases by $15 billion per month beginning in November or December, a pace and starting point that would end the program by June or July.
Of more note now is how the Fed changes other parts of its policy statement, and particularly its description of inflation as “largely reflecting transitory factors.”
Fed officials still largely hold that view. By some time in 2022 they anticipate that global supply bottlenecks will have eased, pandemic-fueled demand for goods among U.S. consumers will cool after massive spending on cars, motorcycles and appliances, and enough people will be pushing to return to jobs that the pace of wage and benefit increases will also subside.
But in recent weeks Fed officials have acknowledged the risks to that outlook. The jump in inflation this year has already lasted longer than anticipated; headline rates are running at twice the Fed’s 2% target; and rising rents, low business inventories, and large numbers of workers still waiting on the sidelines may mean the high pace of price increases will continue for now.