Dhe US Federal Reserve is heading for an early reduction in bond purchases to support the economy. The restriction on the purchase program could begin in mid-November or mid-December, according to the minutes (minutes) of the Federal Reserve’s meeting on September 21-22, published on Wednesday. If the economic recovery continues, the bond purchases could expire around mid-2022, it said.
The US Federal Reserve is currently buying $ 120 billion in government and mortgage bonds a month to support the economy. According to experts from the analysis house Capital Economics, the Fed will decide to reduce bond purchases at the interest rate meeting in early November. The last disappointing labor market report for September should not delay the decision.
As the log further shows, the reduction in the purchase program could take place in monthly increments. Accordingly, a monthly reduction in purchases of government bonds by $ 10 billion and other securities by $ 5 billion is possible.
Price pressure has been high longer than expected
According to some members of the central bank, the current material shortages in the manufacturing sector could mean that price pressure will persist longer than expected. In September, inflation in the US surprisingly rose to 5.4 percent. Economists had expected an unchanged rate of 5.3 percent on average. As inflation rose, it returned to the level of the summer months of June and July, when the rate had reached its highest level since 2008.
The central bank is only aiming for a rate of two percent. The Fed has made it clear over and over again that it sees the rise in inflation as a temporary phenomenon. The publication of the minutes did not move the financial markets sustainably. Investors have already been expecting the reduction in bond purchases to begin this year.