The US central bank’s extremely loose monetary policy of zero interest rates and large-scale quantitative easing is coming to an end.
The US economy is growing rapidly, and while unemployment has not yet returned to pre-crisis levels, high inflation is the reason why the Federal Reserve should start considering changing the course of its monetary policy. Raphael Bostic, head of the Atlanta branch of the Federal Reserve, thinks so. Bostic is one of the so-called hawks within the Fed, and he was already in the tinge of starting interest rate increases in 2022.
But he’s not alone. Tom Barkin, president of the Fed’s Richmond office, said US inflation is already reliably at the level that directly requires interest rate increases. “If inflation has reached 2 percent, and I think it’s already there, and it’s likely to stay there, interest rates should rise,” Barkin said, according to Reuters.
But first, so-called quantitative easing, which the Fed is trying to pump money into the economy and boost growth, will have to be curtailed and phased out. A reduction in the US central bank’s purchases of government bonds could come as far as the last quarter of this year.
