Fed signals way to reduce interest rate purchases in 2022

New York Reuters - The Federal Reserve on Wednesday signaled the way to reduce its monthly bond purchases quickly and cleared the way to reduce interest rate increases in 2022, with 9 of 18 U.S. central bank policymakers predicted borrowing costs will need to rise in 2022 as soon as possible.

The actions, included in the Fed's latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running at 4.2% this year, more than double its target rate, and is poised to act against it.

The current target interest rate was held steady in the range from 0% to 0.25%.

BONDS: The 10- year U.S. Treasury note yield rose to 1.3074% and the two-year one yield was 0.2221%

Across the board it was exactly what we were expecting, the Fed took another step toward a formal taper announcement and that s likely going to come at the next meeting or two.

The key motivation behind the potential rate hike was the upgrade of inflation outlook. There are signs inflationary pressures will be persistent, but they are more transitory than expected. What is the key driver as to why the balance has shifted to a possible rate hike in 2022 instead of 2023?

We watched yield curves flatten. The Treasury market interpreted it as a hawkish surprise.

It was very inline with expectations. Powell will use the press conference to reiterate to the idea that tapering is coming in several months. It is what I expected, not too dovish and not too hawkish. If we don't know who is who, I am not sure if the dotplot accurately reflects the Fed thinking. I don't think the Fed will be anywhere near as hawkish as they anticipate. I s going to be hard for them to execute this plan as the economy slows next year.