US Federal Reserve to quicken taper and signals three rate increases in 2022


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The US Federal Reserve will quicken the pace at which it is pulling back its support for the post-pandemic US economy as inflation surges and it expects to raise interest rates three times next year.

In an abrupt policy shift, the Fed announced on Wednesday that it will shrink its monthly bond purchases at twice the pace it previously announced, likely ending them altogether in March.

The bond purchases were intended to hold down long-term rates to aid the economy but are no longer needed with unemployment falling and inflation at a near 40-year high. The accelerated timetable puts the Fed on a path to start raising rates in the first half of next year.

“Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy,” Fed Chair Jerome Powell said in remarks on Wednesday.

The Fed’s new forecast that it will raise its benchmark short-term rate three times next year is up from only one rate increase it had projected in September. The Fed’s key rate, now pinned near zero, influences many consumer and business loans, whose rates would also probably rise.

The policy change the Fed announced in a statement after its latest meeting had been signalled in remarks chairman Jerome Powell gave to Congress two weeks ago. The shift marked Mr Powell’s acknowledgement that with inflation pressures rising, the Fed needed to begin tightening credit for consumers and businesses faster than he had thought a few weeks earlier.

The Fed had earlier characterised the inflation spike as mainly a “transitory” problem that would fade as supply bottlenecks caused by the pandemic were resolved.

“The path of the economy continues to depend on the course of the virus. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation,” the Fed said in a post-meeting statement.

But the run-up in prices has persisted longer than the Fed expected and has spread from goods like food, energy and cars to services like apartment rents, restaurant meals and hotel rooms.

In response, the Fed is shifting its attention away from reducing unemployment, which has fallen quickly to a healthy 4.2 per cent, down from 4.8 per cent at its last meeting, and towards reining in higher prices.

Consumer prices soared 6.8 per cent in November compared with a year earlier, the government said last week, the fastest pace in nearly four decades.

The Fed’s new policy shift does carry risks. Raising borrowing costs too quickly could stifle consumer and business spending. That, in turn, would weaken the economy and likely raise unemployment.

Yet if the Fed waits too long to raise rates, inflation could surge out of control. It might then have to act aggressively to tighten credit and potentially trigger another recession.

Fed officials have said they expect inflation to cool by the second half of next year. Petrol prices have already come off their peaks. Supply chain bottlenecks in some areas are gradually easing. And government stimulus payments, which helped spur a spike in spending that boosted inflation, are not likely to return.

Yet many economists expect high prices to persist. That likelihood was reinforced this week by a government report that wholesale inflation jumped 9.6 per cent for the 12 months ending in November, the fastest year-over-year pace on records dating to 2010.

Classification of skills

A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation. 

A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.

The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000. 

Mercedes-AMG GT 63 S E Performance: the specs

Engine: 4.0-litre twin-turbo V8 plus rear-mounted electric motor

Power: 843hp at N/A rpm

Torque: 1470Nm N/A rpm

Transmission: 9-speed auto

Fuel consumption: 8.6L/100km

On sale: October to December

Price: From Dh875,000 (estimate)

The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
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Transmission: Single-speed automatic
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On sale: Later this year
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NBA Finals so far

(Toronto lead 3-1 in best-of-seven series_

Game 1 Raptors 118 Warriors 109

Game 2 Raptors 104 Warriors 109

Game 3 Warriors 109 Raptors 123

Game 4 Warriors 92 Raptors 105

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UAE currency: the story behind the money in your pockets
UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

While you're here
How do Sim card scams work?

Sim swap frauds are a form of identity theft.

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Tearful appearance

Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday. 

Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow. 

She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.

A spokesman said her upset demeanour was due to a personal matter.

Global state-owned investor ranking by size

1.

United States

2.

China

3.

UAE

4.

Japan

5

Norway

6.

Canada

7.

Singapore

8.

Australia

9.

Saudi Arabia

10.

South Korea

Brave CF 27 fight card

Welterweight:
Abdoul Abdouraguimov (champion, FRA) v Jarrah Al Selawe (JOR)

Lightweight:
Anas Siraj Mounir (TUN) v Alex Martinez (CAN)

Welterweight:
Mzwandile Hlongwa (RSA) v Khamzat Chimaev (SWE)

Middleweight:
Tarek Suleiman (SYR) v Rustam Chsiev (RUS)
Mohammad Fakhreddine (LEB) v Christofer Silva (BRA)

Super lightweight:
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Jalal Al Daaja (JOR) v Tariq Ismail (CAN)
Chris Corton (PHI) v Zia Mashwani (PAK)

Featherweight:
Sulaiman (KUW) v Abdullatip (RUS)

Super lightweight:
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Updated: December 16, 2021, 3:54 AM