Fed doubles tapering pace and forecasts higher interest rates in 2022

The central bank announced Wednesday it will double the pace at which it shrinks its emergency asset purchases, tapering its buying of Treasurys by $20 billion each month, while its purchases of mortgage-backed securities will shrink by $10 billion monthly. In a Wednesday statement, it attributed this acceleration to"inflation developments and the further improvement in the labor market.

"With elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support," Fed Chair Jerome Powell said in a Wednesday press conference. Faster tapering paves the way for higher interest rates in 2022. The Fed's benchmark rate influences borrowing costs throughout the country from mortgage rates to car loans. The central bank slashed rates to record lows in March 2020 to pad the economy against the pandemicNow, with inflation running at historically high levels, the Wednesday statement suggests officials reverse its ultra-accommodative stance faster than previously expected.

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