The Fed has has begun to ramp down bond purchases, with the intention of ending purchases by June.
Given that the purpose of bond purchases is to drive down interest rates, this can be seen as a pre-precurser to an interest rate increase:
The Federal Reserve closed a chapter on its aggressive, pandemic-driven stimulus when it approved plans Wednesday to begin scaling back its bond-buying program this month amid concerns that inflationary pressures could last longer than officials expected earlier this year.
Fed officials agreed to wind down their $120-billion-a-month asset-purchase program by $15 billion each in November and December, a pace that could phase out the purchases entirely by next June.
Fed Chairman Jerome Powell said officials had pulled forward, relative to market expectations earlier this year, the potential end-date for the bond-buying program in case they decide they need to raise interest rates next year to cool down the economy if inflationary pressures broaden.
I am not surprised. It was inevitable that the Fed would start moving in this direction.
The fact that Chairman Powell has not been running around with his hair on fire about inflation is about as good as we can expect from this institution.
1 comments :
This will be interesting. That program has kept a lot of things out of junk bond status, which pension funds and other regulated investment vehicles would have to IMMEDIATELY digest from if they were.
I’d say pass the popcorn, but the market has the fed over a barrel and I don’t believe they’ll end up following through.
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