FED TO ACCELERATE WITHDRAWAL OF ECONOMIC AID AS PRICES SURGE

Under Chair Jerome Powell, the Federal Reserve is poised this week to execute a sharp turn toward tighter interest-rate policies with inflation accelerating and unemployment falling faster than expected.

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On Wednesday, the Fed will likely announce that it will reduce its monthly bond purchases at twice the rate that Powell had outlined just six weeks ago. Those bond purchases are intended to lower longer-term rates, so winding them down more quickly — likely by early spring — will lessen some of the economic aid the Fed supplied after the pandemic erupted last year.

Fed officials are also expected to forecast that they will raise their benchmark short-term rate, which has been pegged near zero since March 2020, two or three times next year. Rate hikes would, in turn, increase a wide range of borrowing costs, including for mortgages, credit cards and some business loans. Just three months ago, the Fed had penciled in barely one rate increase in 2022.

The Fed’s hard pivot comes after consumer inflation reached a four-decade high in November, and it reflects a growing recognition among Powell and other policymakers that the economy hasn’t progressed the way they had expected it would just a few months ago.