US: Fed meets amid renewed inflation concern, highest in decades.

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source: nytimes.com

US: Fed meets amid renewed inflation concern, highest in decades.

The Federal Reserve began a two-day meeting. After that, it could announce the acceleration of the withdrawal of monetary stimulus in the face of growing concern about the annual rate of price increases.

The United States Federal Reserve began its two-day meeting on Tuesday, the last in 2021. It could announce the acceleration of the withdrawal of monetary stimulus given the growing concern about high inflation in the country.

The meeting of the Federal Open Market Committee (FOMC, in English), which directs the Fed's monetary policy, will conclude tomorrow, Wednesday, at 2:00 p.m. local time (7:00 p.m. GMT) with the release of a statement and a press conference by its president, Jerome Powell.

Last week, the Consumer Price Index (CPI) data in the US was released. In November stood at an interannual rate of 6.8%, the highest figure in almost 40 years in the country.

At the end of November, Powell acknowledged that the high inflation that the United States is experiencing could be more "persistent" than anticipated with the arrival of the new Omicron variant of COVID-19, so the central bank is evaluating to conclude the withdrawal of the purchase of bonuses ahead of time.

In its last meeting at the beginning of November, the Fed left interest rates unchanged in the range between 0% and 0.25%. It announced the opening of the reduction of liquidity injections by 15,000 million dollars per month, from 120,000 million.

With this decision, the volume of monthly bond purchases would be progressively reduced to end the program by mid-2022 ultimately.

Markets estimate that the Fed could now seek to end those bond purchases several months earlier and target March.

Likewise, the Fed will present its new macroeconomic forecasts tomorrow, which in September set a growth rate of 5.9% and inflation of 4.2% by the end of 2021, and which will probably be revised given the complex economic outlook.

Bond yields go up

US Treasury yields rose along the curve on Tuesday, following data that showed producer prices rose faster than expected last month, cementing expectations of an aggressive statement from the Federal Reserve this week.

Producer prices in the United States rose more than expected due to the persistence of supply restrictions, causing the most significant annual advance since the series was renewed in 2010 and supporting the view that inflation could remain high for some time.

"Today's moves are primarily a function of this morning's inflation data," said Ben Jeffery, rate strategist at BMO Capital Markets in New York. "That led people to sell bonds if only to line up positions before tomorrow's Fed meeting."

The US central bank is expected to bet on a faster reduction in asset purchases on Wednesday, which could also bring the start of interest rate hikes closer. In addition, the committee that sets the Fed's policies will also update its members' rate expectations over the next few years.