Fed signals it will reduce bond-buying stimulus by year-end, forecasts first rate hike next year amid higher inflation, slower growth

In conjunction with the Federal Open Market Committee (FOMC) meeting held on September 21–22, 2021, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2021 to 2024 and over the longer run. Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections represent each participant’s assessment of the value to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. “Appropriate monetary policy” is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability. tweet at 2:01pm: FED FORECAST SHOWS OFFICIALS EVENLY SPLIT ON 2022 RATE INCREASE tweet at 2:02pm: *Fed Officials See Inflation of 4.2% at End of 2021; 2.2% for 2022; 2.2% for 2023 *Fed Officials See Core Inflation of 3.7% at End of 2021; 2.3% for 2022; 2.2% for 2023 tweet at 2:04pm: FED'S MEDIAN VIEW OF FED FUNDS RATE AT END-2023 1.0% (PREV.0.6%) tweet at 2:06pm: <img data-emoji="us" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f1fa-1f1f8.png?v=14.0"> Dots: <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> Fed Median dot plot sees 1 hikes in 2022 (prev. 0) <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> Dot Plots: 9 dots see hike in 2022 (prev. 7) <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> 17 dots see hike in 2023 (prev. 13) <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> 3 hikes in 2023 (prev. 2) <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> 7 hikes in 2024 <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> Long run 9 (prev. 9) <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> Fed sees 7 hikes over forecast horizon (prev. 2)

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery. Inflation is elevated, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businessesFederal Reserve holds interest rates steady, says tapering of bond buying coming ‘soon’ The Federal Reserve on Wednesday held benchmark interest rates near zero, but indicated rate hikes could be coming a bit sooner than expected while significantly cutting their economic outlook for this year. Along with those largely expected moves, officials on the policymaking Federal Open Market Committee indicated they will start pulling back on some of the stimulus the central bank has been providing during the financial crisis. There was no indication, though, as to when that might happen. “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the FOMC’s post-meeting statement said. In light of those expectations, the committee voted unanimously to keep short-term rates anchored near zero. However, a majority of members now see the first rate hike happening in 2022. In June, when members last released their economic projections, a slight majority put that increase into 2023. More information could be coming when Fed Chairman Jerome Powell speaks during his post-meeting news conference at 2:30 p.m. ET. There were some substantial changes in the Fed’s economic forecasts. The committee now sees GDP rising just 5.9% this year, compared to a 7% forecast in June. However, 2023 grow tweet at 2:01pm: *FOMC: Maintains $80 Billion Treasury Buying, $40 Billion MBS Buying Per Month *FOMC: Economy Has Made Progress Toward Bond Taper Goals *FOMC: Fed Bond Taper 'May Soon Be Warranted' *FOMC: Inflation Elevated On Transitory Factors tweet at 2:01pm: FOMC STATEMENT COMPARISON https://t.co/7gldQlksj0

tweet at 2:31pm: Powell: Fed Policy Will Continue to Aid Economy Until Recovery Complete tweet at 2:31pm: FED'S POWELL: FOR THE REST OF THE YEAR, GROWTH IS EXPECTED TO BE HIGH. tweet at 2:33pm: FED'S POWELL: INFLATION IS ELEVATED AND WILL LIKELY REMAIN SO FOR MONTHS, BEFORE MODERATING tweet at 2:34pm: POWELL: BOTTLENECKS COULD PROVE LONGER-LASTING THAN EXPECTED tweet at 2:36pm: *POWELL: IF INFLATION A CONCERN, WE'LL RESPOND WITH TOOLS *POWELL: RISKS TO THE ECONOMIC OUTLOOK REMAIN

tweet at 2:36pm: POWELL: IF PROGRESS CONTINUES, TAPER MAY SOON BE WARRANTED tweet at 2:37pm: POWELL: GRADUAL TAPERING TO CONCLUDE AROUND MID-2022 tweet at 2:37pm: *Powell: Fed Taper Process Offers No Signal for Rate Hike Outlook tweet at 2:38pm: POWELL: NO ONE KNOWS WITH ANY CERTAINTY WHERE THE ECONOMY WILL BE IN A YEAR FROM NOW POWELL: FED POLICYMAKER PROJECTIONS ARE NOT A 'PLAN' tweet at 2:40pm: <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> FED HAS MET TEST FOR INFLATION GOAL TO TAPER <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> MANY ON FOMC THINK THE TEST FOR EMPLOYMENT TO TAPER HAS BEEN MET; OTHERS THINK IT IS CLOSE <img data-emoji="small_blue_diamond" alt="" width="18" height="18" class="emoji" src="https://resources.faireconomy.media/images/emojis/64/1f539.png?v=14.0"> MANY ON FOMC FEEL SUBSTANTIAL FURTHER PROGRESS TEST ON EMPLOYMENT HAS BEEN MET; OWN VIEW IS THAT IS IT 'ALL BUT MET'