Federal Reserve

Fed Chairman Jerome Powell said in December that the Fed will accelerate the tapering of its bond-buying program beginning in January, and is planning seven rate hikes over the next two years -including three in 2022, alone – causing an increase in mortgage rates. 

By November 2021, the Fed had bought over $4 trillion worth of treasuries and other securities. It began scaling back total purchases by $15 billion per month in November, and then doubled its taper to $30 billion per month to help fight inflation, or at least slow its rise. The faster wind-down puts the Fed on track to conclude the bond purchases – which are aimed at pushing down long-term rates, such as for mortgages – by March instead of June.

The Fed had viewed sharply rising prices as temporary, attributing them to COVID-19-related supply and demand imbalances. But at a December congressional hearing, Chairman Powell predicted the supply chain issues would likely continue well into 2022. 

Fed officials now predict the economy will grow 4% in 2022, an increase from their prior 3.8% estimate. They predict the unemployment rate will drop to 3.5% by the end of 2022, which they had also previously projected to be 3.8%.