The Federal Reserve will start scaling back on asset purchases in 2022 with emphasis on mortgage-backed securities. Bloomberg survey expectations are clear: the central bank can raise interest rates at a quicker pace through 2024 than initially anticipated.
- More than 50% of the economists expect MBS tapering will happen faster than for Treasuries. Several regional Fed Presidents are purchasing that approach to ease the housing market.
- The economists project two quarter-point rate increases by the close of 2023 with three more increases in 2024.
- The Federal Open Market Committee concludes its two-day policy meeting on Wednesday and is expected to hold the rates close to zero and continue with monthly purchases of $80 billion in Treasuries.
- Fed officials have committed to maintaining bond buying until the economy shows substantial further progress on inflation and employment as it recovers from Covid-19.
The increased interest-rate forecasts emerges alongside an increase in inflation with the reopening of the economy causing huge increases in prices for used cars, airfares, and hotels among other purchases.
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Source: Bloomberg.
