Fed Accelerates Tapering - December 2021

On Wednesday, December 15, the Federal Reserve (Fed) announced it will accelerate the pace (tapering) of its monthly bond purchases.  In November, the Fed announced it would begin reducing its purchases of Treasury bonds by $10 billion per month and purchases of Mortgage-Backed Securities by $5 billion per month.  Solid economic data and multi-decade high levels of inflation have led to the Fed accelerating the reduction in these purchases to $20 billion per month of Treasury bonds and $10 billion of Mortgage-Backed Securities. With this increased pace, the tapering program is now expected to conclude in March of 2022, thereby pulling forward expectations for interest rate increases next year.  Following this announcement equity markets rallied.  Even though interest rates remain at absolute low levels compared to history, the Fed has now set the stage to begin raising rates as soon as this coming spring.