Tapering refers to the gradual reduction of the extraordinary expansive monetary policy measures
The US Federal Reserve (Fed) will likely have to start raising interest rates in late 2022 or early 2023 , as increased government spending keeps inflation above its long-term average target, as the International Monetary Fund (IMF) warns and Bloomberg collects .
In addition, the agency will begin to reduce asset purchases, known as tapering, in the first half of 2022 , the IMF notes.
“Managing this transition, from providing reassurance that monetary policy will continue to provide powerful support to the economy to preparing for an eventual reduction in asset purchases and the end of accommodative monetary policy, will require skillful communications in a timely manner. of potentially adjusted time “, highlights the statement.
The Fed kept interest rates unchanged at its last meeting (June 15-16), although it signaled two rate hikes for 2023 and 7 of the 18 policy makers reflected their preference to raise rates in 2022, compared to 4 from the previous meeting, held in March.
The price indicator for personal consumption expenditures that the Fed uses for its inflation target increased 3.9% in May compared to the previous year, the highest amount since 2008. The IMF forecasts that the increase will be transitory, with a Maximum ratio of 4.3% and a drop of about 2.5% by the end of 2022. It is still above the Fed’s long-term average target of 2%, Bloomberg notes .
The IMF has raised its estimate of growth for the US economy this year to 7%, the fastest pace since 1984 , from a forecast of 6.4% in its last revision in April.