The Federal Reserve just announced it’ll slow its bond-buying program.
In fact, by mid-November, it’s expected to slow the program by $15 billion a month.
That includes reducing net asset purchases of Treasuries by $10 billion, and mortgage-backed securities by $5 billion. All as the central bank reverses course on historic stimulus. However, the Fed is still “prepared to adjust the pace of purchases if warranted by changes in the economic outlook,” as quoted by Barron’s.
That should keep markets calm should economic growth weaken.
In addition, the Federal Reserve still believes inflation is transitory, noting that, “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.”
And while the Fed left interest rates unchanged, markets are expecting hikes by 2022.
In fact, according to Kitco.com, Bank of America expects the Fed to raise interest rates five times, with the first coming in the fourth quarter of 2022.
Other analysts are betting the Fed will hike rates twice in 2022, and another three times by 2023, says CNBC. Fed funds future contracts show a 75% chance of a hike by Summer 2022.
It’ll be interesting to see what comes next. Stay tuned for more.
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