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Fed’s Outlook for Tapering and Rate Hikes

Federal Reserve officials could start cutting extraordinary aid to the economy as early as mid-November, according to minutes from the September meeting of the central bank released on Wednesday.

The summary of the meeting shows that members believe that the Fed is close to achieving its economic goals and may soon begin to normalize policy by reducing the pace of its monthly asset purchases.

Minutes indicate that the central bank is likely to start with a reduction of $ 10 billion a month in government securities and $ 5 billion a month in mortgage-backed securities. The Fed currently buys at least $ 80 billion in bonds and $ 40 billion in MBS.

The target date for discontinuing purchases, if there are no interruptions, will be mid-2022.

“Participants noted that if a decision is made at the next meeting to start reducing purchases, the narrowing process could begin in mid-November or mid-December,” the summary said.


The next Fed meeting is scheduled for November 2-3. The start of the narrowing process in November is on the aggressive side of market expectations.


In a “dot plot” of individual members’ interest rate expectations, the commission said it could start raising interest rates as early as 2022. Markets are currently priced for the first rate hike next September. > After the publication of the protocol, traders increased the probability of a September increase to 65%

However, some members of the meeting expressed concern that the current inflationary pressures could last longer than they expected. Traders set a 46% chance of two interest rate hikes in 2022

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 Junior Trader Nikolay Petrov

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