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Fed Keeps Rates on Hold, Set to Begin Bond Buying Taper This Month

EconomyNov 03, 2021 03:32PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The Federal Open Market Committee on Wednesday detailed plans to begin scaling back asset purchases later this month and said the bar to begin the liftoff in rates would be more "stringent." 

The monthly bond purchases of $120 billion -- $80 billion in Treasuries and $40 billion in mortgage-backed securities – would be trimmed by $15 billion a month. 

Under the taper plans, the Fed will reduce monthly Treasury purchases by $10 billion and mortgage-backed securities by $5 billion. Still, the Fed's balance sheet will continue to expand, but at a reduced pace.  

The taper puts the Fed on track to end its bond-buying program by mid-2022, but Fed cautioned that the pace of bond-buying may change depending on incoming economic data.

"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."

At the conclusion of its two-day policy meeting on Wednesday, the Federal Reserve kept its benchmark rate in a range of 0% to 0.25%. 

In the wake of surging inflation, market participants have ramped-up bets against central bank's current view on the path of interest rates hikes. Traders are pricing in two rate hikes in 2022, according to Investing.com's Fed rate monitor tool. That is well ahead of the Fed's current projection for a single rate hike by late 2022 or early 2023. 

But Fed chairman Jerome Powell reiterated on Wednesday that the conditions for a liftoff in rates would be more stringent, and would require a further improvement in the labor market.

"[W]e don't think it's a good time to raise interest rates because we want to see the labor market heal further," Powell said. [W]e have very good reason to think that that will happen as the Delta variant declines."

“Our decision today to begin our tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate," Powell added.

In support of his more measured outlook on rate hikes, Powell suggested that factors including supply-chain shortages that have driven up inflation pressures will likely ease in the second and the third quarter next year.   

Fed Keeps Rates on Hold, Set to Begin Bond Buying Taper This Month
 

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Comments (33)
jj mm
jj mm Nov 04, 2021 2:50AM ET
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USA debt and easy money will destroy America. How could they say inflation is transitory? serious? All major central banks are hiking rates and Powell is saying inflation is transitory?
Atlantic Coast Money
Atlantic Coast Money Nov 03, 2021 8:28PM ET
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Alright hopefully a healthy 2-3% pullback in the Russell before the next leg higher. Otherwise it seems they are going to squeeze the shorts out until OPEX this month. I would love to buy back my covered calls and sell December, but I can feel the euphoria. Similar to a stoner on a steamroller.
hans gaaikema
hans gaaikema Nov 03, 2021 6:17PM ET
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"by at least 70 mln..., by at least 35 mkn". not any commitment to not buy more, yet people tight that looks like "tightening".
MK MK
MK MK Nov 03, 2021 5:27PM ET
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Either they are really silly or just try to look so. If they stopped printing immediately and increased rate by 0,25 it would lower prices of all commodities. Inflation is caused by huge money supply but not problems with deliveries. Just slowdown your consumption, greedy bustards, you have not earned it
Mario tragik
Mario tragik Nov 03, 2021 4:34PM ET
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what a complete joke this is. shameful, the more it jumps the harder the crash will be when it corrects whenever that is. whats sad is that middle and lower class always end up paying the price. sad.
George Pichurov
George Pichurov Nov 03, 2021 4:23PM ET
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"We articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate," like... 15% inflation?
Suyog Subhash
Suyog Subhash Nov 03, 2021 4:23PM ET
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what is effect on gold
Leon Kelly
Leon Kelly Nov 03, 2021 3:46PM ET
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Boy look at those shorts covering.. My puts are confetti
Zsombor Komán Birtalan
Zsombor Komán Birtalan Nov 03, 2021 3:21PM ET
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they Will hike the rates before June, expecting March-April
Jacob Varghese
Jacob Varghese Nov 03, 2021 2:37PM ET
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Even if FED doesnt hike the rate now,most countries will and some countries already have.
Hemant Verma
Hemant Verma Nov 03, 2021 2:34PM ET
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I was fool to put everything in puts. Sad i was trying to short this mad bull run have to close positions with heavy loss now
ankur songs
ankur songs Nov 03, 2021 2:34PM ET
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dont worry bro. u will win tomorrow
BLIZZARD IcE
BLIZZARD IcE Nov 03, 2021 2:34PM ET
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never ever put everything in a event.. they know everything before you know..
Mohd Ekhwan Wahab
Mohd Ekhwan Wahab Nov 03, 2021 2:34PM ET
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you not alone
Sagar Suryawanshi
Sagar Suryawanshi Nov 03, 2021 2:33PM ET
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let's rise the inflation.. let's rise the stock market.. let's kill the middle class.
Sagar Suryawanshi
Sagar Suryawanshi Nov 03, 2021 2:32PM ET
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let's rise the inflation.. let's rise the stock market.. let's kill the middle class.
Steffen vdm
Steffen vdm Nov 03, 2021 2:30PM ET
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It only took the Nasdaq 1.5 years to grow 100% from 7,800 to 15,600. For comparison: it took 6.5 years to go from 3,900 to 7,800. 100% growth in 1.5 years... That's very, very unhealthy
Alexxx Alexxx
Alexxx Alexxx Nov 03, 2021 2:30PM ET
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Totally agree. Trade économie cannot grow 100% in soo short time.. It's extremely unhealthy for common people
Dave Jones
Dave Jones Nov 03, 2021 2:28PM ET
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regarding buying everything to cushion your friends from any impact....good job! All time highs all the way!! well done you mucs !
mark twain
mark twain Nov 03, 2021 2:25PM ET
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What will the elites do with only $100bn of freshly printed money this Christmas?
jj mm
jj mm Nov 03, 2021 2:25PM ET
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buy iphone 13?
FADHILI SIKA
FADHILI SIKA Nov 03, 2021 2:24PM ET
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i think under this consideration USD still strong
Mike Cosenza
Mike Cosenza Nov 03, 2021 2:17PM ET
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Transitory?.....I am beginning to think they don't understand the meaning of this word.
hd tv
hd tv Nov 03, 2021 2:16PM ET
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at what point are Americans going to wake up and realise its a corporatocracy. wall street holds all the power and as long as inflation boost their profits they won't change anything
John Miller
John Miller Nov 03, 2021 2:16PM ET
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it's a corpcongspiracy
Vincenzo Tilotta
Vincenzo Tilotta Nov 03, 2021 2:16PM ET
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Exactly, this 15 B reduction is tiny, too little too late, they have no interest to stop the money printer going bbrrrrrr, this is not even a serious reduction, just the bare minimum to try and show that they are not frozen
Vincenzo Tilotta
Vincenzo Tilotta Nov 03, 2021 2:16PM ET
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They really want inflation to rise and rise, it is their desire and they will achieve it, it is perfectly within their power to destroy the economy and keep on pouring gasoline on the fire. 5 bucks for 1 banana anyone?
John Miller
John Miller Nov 03, 2021 2:16PM ET
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Vincenzo Tilotta like a deer in the headlights raising one foot of the road as the car hurls at it
Farhan Zahir
Farhan Zahir Nov 03, 2021 2:16PM ET
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down
Farhan Zahir
Farhan Zahir Nov 03, 2021 2:16PM ET
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fall
vet Sen Vet Sen
vet Sen Vet Sen Nov 03, 2021 2:14PM ET
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elly vinelly
elly vinelly Nov 03, 2021 2:13PM ET
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what would be the effect on gold?
עמי מגלד
עמי מגלד Nov 03, 2021 2:13PM ET
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pretty good
Sohel Rana
Sohel Rana Nov 03, 2021 2:13PM ET
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Matt Novakovich
Matt Novakovich Nov 03, 2021 2:12PM ET
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as my shorts go more and more negative 🙄
Steffen vdm
Steffen vdm Nov 03, 2021 2:10PM ET
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"The Fed, however, has adopted a new framework that would allow inflation to run above its target to make up for years of inflation trending below target". Changing the rules because things are out of control. There we fixed it!
 
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