The US Federal Reserve (Fed) is gradually withdrawing the crisis aid it issued in the corona pandemic. The monetary watchdogs headed by Fed chairman Jerome Powell decided on Wednesday to melt their security purchases, which currently total 120 billion dollars per month, from mid-November.
Initially, the volume of bond purchases is to be reduced by ten billion and that of mortgage paper by five billion. The operation is to be repeated to the same extent in December. This process of gradually reducing the dose of cash injections, known in technical jargon as tapering, should be completed by next year.
Tapering means a turnaround in monetary policy. The end of the acquisitions in the bond purchase program is a prerequisite for an interest rate hike. In their outlook in September, the monetary authorities signaled that there could be an increase as early as next year.
The key interest rate, which is in the extremely low range of 0.0 to 0.25 percent, will not change for the time being. The monetary policy decisions had been expected in the financial markets, the Fed had prepared investors accordingly. Federal Reserve Chairman Jerome Powell wanted to explain the decisions on Wednesday evening at a press conference.
The main tension on the stock markets is likely to be how the Fed is positioning itself on persistently high inflation and what signals it is sending about the possible schedule and pace of interest rate hikes. (SDA)