The U.S. Federal Reserve has held interest rates steady and said it plans to begin tapering its bond purchases "soon."
The U.S. central bank indicated that it could begin scaling back its asset purchases as soon as this November and complete the process by mid-2022.
Fed Chairman Jerome Powell, explaining the U.S. central bank’s first steps toward withdrawing emergency pandemic support for the economy, told reporters that tapering "could come as soon as the next meeting."
That refers to the central bank’s next policy meeting scheduled for November 2 and 3, although Powell left the door open to waiting longer if needed and stressed that tapering was not meant to start a countdown to liftoff from zero interest rates.
"The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff," he said, adding that he doesn’t expect the Fed to begin rate increases until after completing the taper process in the middle of next year.
In addition to signaling a scale back in upcoming bond buying, officials also published updated quarterly projections which showed officials are now evenly split on whether or not it will be appropriate to begin raising interest rates as soon as next year.
The Fed announced that it has decided to maintain the target range for its benchmark interest rate at zero to 0.25% and continue purchases of U.S. Treasuries and mortgage-backed securities at a pace of $120 billion U.S. per month. The vote was unanimous.
Projections for 2024 were also published for the first time, with the median suggesting a federal funds rate of 1.8% by the end of that year. The median for 2023 rose to 1% from 0.6% in the June projections.
The Fed’s median projection for 2022 inflation rose to 2.2% from 2.1% in June but it held the 2023 inflation forecast steady at 2.2%. U.S. inflation was 4.2% in the 12 months through July, well above the central bank’s 2% target. Many Fed officials have said they expect it to return to around 2% cent after temporary supply chain disruptions resulting from the pandemic have been resolved.
