Monetary policy US Federal Reserve to significantly boost emergency funding cuts and hints to raise policy rate three times next year

Of the United States the central bank decided on wednesday that securities purchases initiated as a result of the coronavirus pandemic would be reduced much faster than planned.

In November the central bank announced to start reducing securities purchases by $ 15 billion a month, but to cut purchases by $ 30 billion a month from January

As a result of the decision, the central bank may also tighten monetary policy earlier than previously estimated, as the rise in consumer prices, ie the rate of inflation in the United States, has accelerated significantly.

Central bank hinted on Thursday that monetary policy will be tightened, meaning the policy rate will be raised three times next year. The change is very big, as more than a month ago the central bank hinted that it would tighten monetary policy only once next year.

The root cause of the significant change in monetary policy is the sharp rise in consumer prices, the main reasons for which are the stagnation of supply and the sharp rise in demand.

In November, the inflation rate was 6.8 per cent, the strongest in almost 40 years. The central bank aims for an average inflation rate of 2% over the long term.

Thursday in the published economic forecast, the central bank estimates that the inflation rate in the United States will accelerate to 5.3 per cent this year, but will slow to 2.6 per cent next year, 2.3 per cent in 2023 and 2.1 per cent in 2024.

The market previously estimated on Wednesday that securities purchases will be discontinued in March, and in May the central bank will raise its key interest rate. It is currently in the range of 0-0.25%.

In its opinion, the Open Market Committee, which decides on monetary policy, considers that it is justified to maintain the key interest rate until the full employment target of the Committee has been reached.