The Federal Reserve held steady its target for overnight rates to a range of 0 – 0.25%, as it has for about 20 months.
- Policymakers elected to tap the brakes harder on bond buying, and will be reducing buys by $30 billion a month, as generally expected
- Language in the FOMC statement dropped reference to persistently below-2% inflation, reinforcing a tightening bias in the offing
An updated quarterly dot plot indicates a median forecast among Fed officials for 3 rate hikes in 2022, a substantial increase
There exists a ridiculous clip—since memeified—from the cartoon “Family Guy,” in which a character, worried about injury, starts down a staircase comically carefully, only to trip, roll down the stairs, and injure himself. That clip seems all too reminiscent of the 2021 FOMC. After spending months taking care to make the end of QE gradual and uneventful, Fed policymakers are now rolling down the stairs. Today’s tumble comes in the form of an accelerated taper. As widely anticipated and presaged over the last several weeks, the FOMC elected to slow its bond buys by $30 billion per month, double the $15-billion-per-month pace announced at the November meeting. That will bring QE to an end by March 2022, and provide Jay Powell and his fellow tumblers with the flexibility to respond to post-pandemic inflation risks.