MercoPress. South Atlantic News Agency

Federal Reserve begins gradual monthly tapering of stimulus this month

The Fed will reduce its monthly pace of net asset purchases by US$10 billion for Treasury securities and US$ 5 billion for agency mortgage-backed securities

Finally, following a two-day meeting, it's official: the US Federal Reserve announced on Wednesday it will begin tapering stimulus to the economy this month but also leaving the door open for possible changes if there are shifts in the scenario because of the pandemic. Likewise, inflation was described as “transitory” because of supply chain issues in the post-pandemic recovery.

“The path of the economy continues to depend on the course of the virus. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation”, said the release from the Federal Open Market Committee, FOMC.

Likewise the Committee decided to begin reducing the monthly pace of its net asset purchases by US$10 billion for Treasury securities and US$ 5 billion for agency mortgage-backed securities, in light of the substantial further progress the economy has made toward the Committee's goals (maximum employment and 2% inflation over0 the longer run), since last December,

“Beginning later this month, the Committee will increase its holdings of Treasury securities by at least US$70 billion per month and of agency mortgage backed securities by at least US$35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least US$ 60 billion per month and of agency mortgage-backed securities by at least US$30 billion per month”

The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.

The Federal Reserve's ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.