Pretty much as expected, the Federal Reserve last week said that, in the face of rising inflation and a booming economy and job market, it would further reduce its purchases of Treasury and mortgage-backed securities and raise interest rates.
But not yet.
Beginning in January, the Fed said it will be buying $60 billion in bonds a month, which is down 50% from the original schedule of $120 billion a month and its recently reduced plan of $90 billion, announced only a month ago. Which means the program will end next March, as opposed to the original termination date of June, at which time the Fed expects to start raising interest rates unless something happens in the meantime.
The Fed is projecting three 25 basis-point increases in its federal funds rate next year, followed by three more in 2023 and two more in 2024. That would put the fed funds rate in a range of 1.4% to 1.9% at the end of 2023, up from a range of 0.4% to 1.1% in its previous projection in September. The current rate, of course, is 0.1%, or near zero. Continue reading "Powell Wimps Out"