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Federal Reserve Starts Taper

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Federal Reserve Starts Taper

November 3, 2021
By SystemsAdmin
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Federal Reserve Starts Taper in Bond Purchases

Beginning in November 2021, the Fed will reduce the monthly volume of Mortgage-Backed Security and Treasuries purchases, putting upward pressure on interest rates. Asset purchases are slated to cease by summer 2022 and the National Association of Homebuilders forecasts that rates may reach 4% by 2023 as a result. The first rate hike is anticipated sometime in 2022, but timing remains speculative and the Fed may adjust the rate of tapering to meet economic demands and conditions.

So what does all that mean?  Tapering bond purchases is the first step in pulling back support for the housing market during the pandemic, 2020 ‘recession,’ and recovery. Additionally, rate increases are a response to inflation gains this past year which hit a 30-year high thanks to soaring demand and supply chain disruptions.

As the economy recovers, people return to work, and supply chain bottlenecks ease, inflation is expected to drift lower.  But slowing economic growth and spending and increasing prices indicate inflation may remain high longer than expected leading investors to suspect that the Fed may raise rates sooner and faster than announced.

For more information on Fed Tapering and Inflation read here and here.

Tags: Affordable homeownership Federal Reserve Federal Reserve Taper homeownership Interest Rates

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