Fed to start rolling back stimulus measures

With inflation on the rise, the Federal Reserve plans to scale back its purchases of Treasury securities and agency mortgage-backed securities, chairman Jerome Powell said Wednesday. Those purchases were designed to hold down long-term interest rates to spur borrowing and spending. With the economy recovering from its pandemic downturn, that’s no longer needed, though Powell said the Fed was keeping interest rates close to zero.

Why the change? The announcement comes against the backdrop of surging prices across the economy for food, rent, auto, and many other necessities. The Fed has conceded that inflation now seems likely to last longer than anticipated. Powell said the unusual circumstances surrounding the pandemic have made things hard to predict.

Dig deeper: Listen to Nick Eicher and David Bahnsen discuss the factors weighing down the U.S. economy on The World and Everything in It podcast.