Federal Reserve pulling back on stimulus, preparing for rate hikes

[WASHINGTON] The US Federal Reserve will end its bond-buying stimulus program in early March, when it is expected to begin to raise interest rates to combat inflation.

Here is a look at the key Fed moves to help support the US economy in recent years.

NOVEMBER 2008

As it cuts the benchmark interest rate to zero at the height of the global financial crisis, the Federal Reserve announces a new programme called quantitative easing (QE) to buy debt held by government-sponsored mortgage lenders and mortgage-backed securities (MBS), and later adds longer-term Treasury debt.

JUNE 2013

Fed Chair Ben Bernanke announced the central bank was prepared to start to reduce its holdings, sparking the "taper tantrum" in financial markets, which delayed the actual taper until December, when QE was slowed by US$10 billion a month. The Fed halts new asset purchases a year later.

DECEMBER 2015

The Fed lifts off, raising the benchmark borrowing rate to 0.5 per cent. The next increase won't happen until a year later, taking the rate to 0.75 per cent.

2017-2019

As the economy expands, the Fed committee focuses on policy normalisation, reducing the size of its securities holdings which had swelled to US$4.5 trillion, and raising interest rates three times each year, with the final hike in October 2019 taking the rate to 1.75 per cent.

MARCH 15, 2020

After the Covid-19 pandemic hits the United States, the Fed cuts interest rates to zero and announces it will restart QE, purchasing Treasuries and MBS, eventually increasing asset purchases to US$120 billion a month.

NOVEMBER 3, 2021

With the economy recovering and inflation picking up speed and hitting a 30-year high, the Fed announces it will reduce the pace of bond purchases by US$15 billion a month, meaning QE would end by mid-2022 and open the door for policymakers to consider rate hikes.

NOVEMBER 30, 2021

Fed Chair Jerome Powell admits high inflation might continue for some time, and said it would be appropriate to speed up the taper to end bond purchases "a few months sooner".

DECEMBER 15, 2021

The Fed accelerates the wind-down now set to end in early March.

JANUARY 26, 2022

Fed Chair Jerome Powell in an unusually blunt comment said officials are prepared to raise rates in March, after data showed consumer prices rose seven percent in 2021, the highest in 40 years. Economists expect three or four rate hikes in 2022. AFP