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Wednesday, September 28, 2022

Fed on course for tightening to combat high inflation

EconomyFed on course for tightening to combat high inflation

Washington (The Times Groupe)- The US Federal Reserve is on track to continue tightening monetary policy despite recession concerns.

Since the central bank gradually ended the supportive measures it introduced to help offset the economic fallout of the Coronavirus pandemic, it is maintaining a monetary tightening course to combat rising inflation.

The Fed has begun raising interest rates and reducing its asset portfolio, which had grown due to monetary easing during the pandemic. By returning bonds and papers, the amount of money circulating in the economy will be reduced.

Fed plans to reduce its portfolio by $30 billion in Treasury bonds and $17.5 billion in mortgage-backed securities each month.

As of September, the Fed will increase this amount to a total of $95 billion — $60 billion for Treasury bonds and $35 billion for mortgage-backed securities.

The Fed’s balance sheet will shrink by $2-3 trillion over the next few years, depending on how long it takes.

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