On December 15, the Federal Reserve announced numerous quantitative tightening measures that have the intended goal of combating the rising inflation that has been bogging down the American economy. As of November 2021, the rate of inflation has reached 6.8 percent, the highest since 1982, and is unlikely to have peaked yet.
Despite Federal Reserve chairman Jerome Powell originally proclaiming this inflation spiral to be transitory, the Federal Reserve has announced that they will end their bond buying program three months earlier than expected, in addition to speculating three interest rate hikes in the coming years as opposed to the originally planned single rate hike.
With the quantitative easing policy maintained throughout the covid-19-induced recession finally ending, the federal funds rate is expected to rise to 0.9 percent in 2022, 1.6 percent in 2023, 2.1 percent in 2024, and 2.5 percent in the undetermined long run. Mortgage-backed security and bond purchases will be reduced by $10 billion and $20 billion a month, respectively, in order to expedite the conclusion of the program by March 2022, rather than June. While this course of action is likely to mitigate the soaring inflation, it may lead to a myriad of detrimental effects to other facets of the economy.
Categories: Economics/Class Relations