Bisnis.com, JAKARTA – Federal Reserve or The Fed officials agreed to cut the pandemic stimulus starting mid-November or mid-December because of inflation concerns.
“Participants [pertemuan] generally consider that, as long as the economic recovery remains on track, the process tapering phased out around the middle of next year will likely be feasible,” the minutes of the September 21-22 Federal Open Market Committee meeting released Wednesday were quoted as saying. Bloomberg on Thursday (14/10/2021).
Participants noted that if the decision started tapering purchase occurs at the next meeting, process tapering can start with a monthly purchase calendar starting in mid-November or mid-December.
The minutes show Fed officials are looking to solve the puzzle of determining a mandate. They are still betting on whether the supply of labor can return to the same as in 2019 and the possibility that inflation will subside even though there are still supply constraints that will raise prices.
The decision to do tapering this year is also an attempt to manage the risk that they are wrong on price.
“There’s been a bit of a fundamental shift going on where there was concern that temporary inflation might shift to concerns that it might be structural. In fact the committee wants to make sure that inflation expectations and financial conditions don’t start to raise concerns,” said Michael Pond, Barclays Chief Global Inflation Markets Strategist. .
Fed officials last month kept interest rates close to zero, signaling they are starting to cut back on their $120 billion monthly asset purchases.
Earlier, Fed Chair Jerome Powell said the process tapering will start as early as November and will end in mid-2022.
“The minutes make it clear that the Fed will announce tapering at the FOMC meeting on November 2 – 3, unless disaster strikes,” said Pantheon Macroeconomics Chief Economist Ian Shepherdson.
Inflation increased at its highest pace in years and exceeded the Fed’s target of 2 percent.
Some officials say supply chain bottlenecks and production tangles could continue to pressure prices longer than they expect. Consumer prices rose 5.4 percent in September from a year earlier, the Labor Ministry said on Wednesday.
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