The Federal Reserve has announced that it was tapering off the monthly support which was introduced to strengthen the US economy during the coronavirus pandemic. Now in response to the higher inflation, the US central bank is planning to cut back its stimulus program. However, the process will be executed gradually. It is expected that the stimulus will end by March 2022.
Federal Reserve chair Jerome Powell said, “Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy.” He also added, “In my view, we are making rapid progress toward maximum employment.”
Experts are assumed that the interest rate will rise in the first half of 2022. It is projected that by the end of 2022, the benchmark interest rates would rise from current near-zero levels to 0.9%.
During the pandemic period, Federal Reserve was winding down its support of the economy. But the inflation rate is rising up dramatically which is lowering the standards of living for mass people. The US citizens are struggling to meet the cost of basic essentials.
Chief Strategist at Principal Global Investors, Seema Shah said, “The Fed apparently just woke up to the inflationary pressures consuming the US economy. With [Consumer Price Inflation] in touching distance of 7%, it should be of no surprise to see the Fed accelerating tapering.” She also added, “Price pressures may well ease next year, but inflation will settle at a level uncomfortably high for the Fed.”