Fed doubles pace of tapering, warms up to rate hikes in 2022 as inflationary pressures rise

[mahatmakanejeeves]

Source: Yahoo! Finance

Yahoo Finance

Fed doubles pace of tapering, warms up to rate hikes in 2022 as inflationary pressures rise

Brian Cheung · Reporter
Wed, December 15, 2021, 2:00 PM

The Federal Reserve announced that it would move more quickly to pare back its pandemic-era easy money policies as Fed officials grow concerned about the persistence of inflationary pressures.

On Wednesday, the policy-setting Federal Open Market Committee said it would double the pace by which it winds down its asset purchase program.

The FOMC also signaled a strong likelihood of an interest rate hike next year, which would be the first since the central bank slashed short-term borrowing costs to near-zero in March 2020.

Since the depths of the pandemic, the Fed has added trillions of dollars in U.S. Treasuries and agency mortgage-backed securities to signal its support for financing conditions. The Fed had set a course in November to “taper” the pace of those aggregate purchases by $15 billion per month, and will now double that pace — to $30 billion per month.

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Read more: https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-december-2021-153342164.html

[IronLionZion]

1. Cautiously optimistic

I was hoping they would announce a small rate increase today.

Powell accepts publicly that inflation will continue another year. That's a bit concerning for our election chances.

[Calista241]

2. Yeah, i was hoping rates would go up today

Which would be bad for us in the short term, but putting if off until next year will just make it worse imo.

[peppertree]

3. Let's hope they don't try to throttle the economy in 23/24 - like Greenspin did against Gore in 2000

There was almost no inflation - yet they started raising rates like there was no tomorrow.

Once Dubya was safely ensconced as the president-select, they began bringing them down like a big exhale.

[not fooled]

4. I guess I'd better get my house on the market ASAP

presumably rising rates will slow the housing market.

[Slammer]

5. Numbers

Consider the numbers:

We're borrowing roughly half of the $4 trillion it's taking to run the government each year.

The other half comes from various taxes and fees the government collects.


At the same time, roughly 1/4th of the government's spending goes toward paying the interest on the existing national debt.


That means half of what the government takes in yearly with taxes and fees goes toward paying the yearly interest on the national debt.

And that's with interest rates on government debt at close to historic lows.


I would suggest that the Treasury doesn't have much room, at this time, to increase interest rates without absolutely cratering the deficit, the debt, and the economy.

[IronLionZion]

8. Low interest rates is the best time to take on debt

so it would be best to lock it in at low rates now since it will be increasing next year.

[Slammer]

9. except that's not what's happening

Except they aren't locking it in.

The vast majority of treasury notes are being issued, even now, for less than a year.

So any bump up in the interest rates is going to almost immediately going to be felt in higher interest rates on the debt and higher government spending to cover the interest.

[Rebl2]

6. Should have

gone up a little today.

[tirebiter]

7. Room to move