US Fed says improving economy may soon warrant asset purchase taper

​By a staff reporter : 

‌*US Fed says improving economy may soon warrant asset purchase taper*

‌--US Fed leaves federal funds rate target range unchanged at 0-0.25%

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‌--Progress made toward maximum employment, inflation goals

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‌--If econ improves as expected, may soon need to cut asset buys

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‌The US Federal Reserve's Federal Open Market Committee unanimously voted to leave the federal funds rate target range unchanged at 0.00-0.25%, but warned that it may soon need to start buying a smaller quantum of assets every month.

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‌"Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 bln per month and of agency mortgagebacked securities by at least $40 bln per month until substantial further progress has been made toward its maximum employment and price stability goals," the committee said in its statement late Wednesday.

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‌"Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted," it added.

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‌The latest guidance on its asset purchases is an upgrade from July, when the committee had said it will continue to assess progress made toward the employment and inflation goals in the coming meetings.

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‌In his speech at the Jackson Hole summit last month, Fed Chair Jerome Powell had noted that he, along with most members of the committee, were of the view in July that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.

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‌Along with greater indication of the Fed not being too far away from tapering its asset purchases, members of the Federal Open Market Committee also brought forward their expectations of interest rate hikes. FOMC members now see interest rates rising in 2022 itself, with their latest economic projections indicative of a 25-basis-point rise in the federal funds rate target range next year.

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‌In June, the projections suggested interest rates would rise only in 2023.

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‌Clues on when the Fed will begin to ease up on its asset purchases have been widely sought by market participants, with every new economic data point causing further speculation that it may be just round the corner. US inflation has been at its highest in over a decade in recent months, although FOMC members see core private consumption expenditure inflation dropping off sharply to 2.3% in 2022 from 3.7% in 2021, as per the latest projections.

Source : Eureka