- Prior taper pace was $10B Treasuries and $5B MBS
- Change to the taper is " In light of inflation developments and the further improvement in the labor market"
- Fed funds rate held at 0.00-0.25%, as expected
- Says similar pace of taper expected in the coming months
- Prepared to adjust the pace of purchases if warranted by changes in the economic situation
- Expects it will be appropriate to keep rates at current level until labor market conditiosn meet levels consistent with maximum employment
- Dot plot shows three hikes in 2022 vs two hikes expected
- Dot plot sees three more hikes in 2023
- Supply and demand imbalances due to pandemic and reopening continued to contribute to elevated inflation
The Fed was expected to double the pace of the taper to $20 billion in Treasuries and $10 billion in MBS in response to higher inflation and that's exactly what happened. The moderate surprise is in the dot plot where most saw two hikes being priced in and now it shows three. That's in-line with markets anyway.
A 74% chance of an April hike is now priced in, rising to 100% in May.
The US dollar initially jumped on the headlines but it's been a quick reversal as the dip buyers wade in.
