Fed Could Raise Rates 3 Times in 2022 and Speeds End of Bond-Buying

But Mr. Powell batted back that idea on Wednesday, providing a detailed look at his own evolution in thinking about inflation and the data that convinced him the Fed needed to speed up its plans.

“It had nothing to do with it at all,” he said of the reappointment, noting that other Fed officials were already setting up the change in policy before Mr. Biden’s decision was announced. “My colleagues were out there talking about a faster taper, and that doesn’t happen by accident.”

Mr. Powell, his colleagues and many economists had initially expected rapid price gains to fade fairly quickly as the economy got through a bumpy reopening period after lockdowns meant to contain the pandemic.

But Mr. Powell said his shift began after Labor Day, as the job market showed signs of strengthening and inflation readings remained elevated. Just before the Fed’s last meeting on Nov. 2-3, wages moved up sharply in the Employment Cost Index, which tracks how much employers are spending on their workers.

“We got the E.C.I. reading on the eve of the November meeting and it was very high,” Mr. Powell said, adding that index was so elevated he briefly considered announcing a faster end to the bond buying than what policymakers ultimately announced.

“I thought for a second there whether we should increase our taper,” he said. Then additional data poured in, showing signs of rapid inflation that was broadening into categories that were not simply roiled by the pandemic: Rents were rising, for instance. Labor market progress also proved “much faster,” prompting the change in tone and approach.

Many policymakers still hold out hope that inflation will fade back toward the Fed’s 2 percent annual average goal as global shipping routes clear through backlogs, factory production increases to meet demand, and consumers shift toward more normal spending patterns after scrambling to buy lawn equipment and stationary bikes during the pandemic.

Article source: https://www.nytimes.com/2021/12/15/business/economy/inflation-fed-fomc-meeting-december-2021.html