Taper tempo may pick up

Even Covid variation creates great uncertainty about the economic outlook, Federal Chair Jerome Powell hinted on Tuesday that the Fed may speed up its tapering of bond purchases due to rising inflationary pressures. He sees a reduction in monthly bond purchases much faster than the $15 billion-a-month plan announced earlier this month. and want to the issue at the December meeting.

The Federal Open Market Committee sets monetary policy, including interest rates, and the Fed works to stimulate economic activity by buying bonds. The November meeting said it would cut the pace by $15 billion per month ($10 billion in Treasuries and $5 billion in mortgage-backed securities). Under the original tapering plan, bond purchases would end around June; if the Fed chooses to accelerate rate hikes, that could mean an end to rate hikes early in the spring, leaving room for the Fed to raise rates any time after then.

Powell's remarks were interpreted by the market as a possible acceleration of the Taper rhythm, triggering a drop in U.S. stocks and a rise in Treasury yields. At the same time, it increases investors' concerns about the market future, which is already jittery about virus variation.