Combating higher inflation was a heavy focus at last month's Federal Open Market Committee meeting, with Federal Reserve officials approving an accelerated end to its asset-buying program, according to minutes released Wednesday from its Dec. 14-15 meeting.
In response to the COVID-19 pandemic in early 2020, the Fed established monthly bond purchases — $80 billion in Treasury securities and $40 billion of mortgage-backed debt. At its meeting in early November, the Fed indicated that it would scale back its bond purchases by $15 billion a month starting in November, but at the December meeting, it unanimously agreed to accelerate the scale-back's pace to $30 million a month.
"In light of elevated inflation pressures and the strengthening labor market, participants judged that the increase in policy accommodation provided by the ongoing pace of net asset purchases was no longer necessary," the minutes said. "They remarked that a quicker conclusion of net asset purchases would better position the committee to set policy to address the full range of plausible economic outcomes."
The change in the taper pace reflects "inflation developments and the further improvement in the labor market," the committee said in a statement following its December meeting. The Fed reiterated that it "is prepared to adjust the pace of purchases if warranted by changes in the economic outlook."
While FOMC members generally anticipated that inflation would decline significantly in 2022 as supply constraints eased, almost all stated that they had revised up their forecasts of inflation for 2022, and many did so for 2023 as well, according to the minutes.
The Fed has also kept the target range for the federal funds rate near zero since March 2020, but that's likely to change this year. The median estimate among FOMC members to raise interest rates for the first time since the pandemic began was moved up to June 2022 from the first quarter of 2023, meeting minutes show.
In assessing the appropriate stance of monetary policy moving forward, the committee said it would evaluate a wide range of information, including readings on public health, labor market conditions, inflation pressures and expectations, and financial and international developments, according to the minutes.
The FOMC's next meeting is Jan.25-26.
Federal Reserve Chairman Jerome Powell and board member Lael Brainard have nomination hearings before the Senate Banking Committee on Jan. 11 and Jan. 13, respectively. President Joe Biden in November renominated Mr. Powell, who has served on the Fed board since 2012 and was confirmed as chairman in 2018, and nominated Ms. Brainard, a board member since 2014, as Fed vice chair.