Fed on course for tightening to combat high inflation

WASHINGTON

The US Federal Reserve (Fed) is on track to continue its monetary policy tightening despite recession concerns.

Having gradually ended the supportive measures it introduced to help offset the coronavirus pandemic’s economic fallout, the central bank is maintaining course towards monetary tightening to combat rising inflation.

As part of this policy, the Fed has begun raising interest rates and reducing its asset portfolio, which had grown as a result of monetary easing during the pandemic. This will serve to lower the amount of money circulating in the economy by returning bonds and papers.

The Fed plans to reduce the size of its portfolio by an initial monthly $30 billion in treasury bonds and $17.5 billion in mortgage-backed securities.

After the first three months, the Fed will increase this monthly amount to a total of $95 billion — $60 billion for treasury bonds and $35 billion for mortgage-backed securities — as of September.

While it is unclear how long the process will take, the shrinkage in the Fed’s balance sheet is expected to reach $2-3 trillion.

*Writing by Gokhan Ergocun

Anadolu Agency website contains only a portion of the news stories offered to subscribers in the AA News Broadcasting System (HAS), and in summarized form. Please contact us for subscription options.