Goldman Says Fed May Accelerate Tapering in January: Report

Having kicked off the unwinding of the crisis-era stimulus this month, the U.S. Federal Reserve may accelerate the pace of the tapering next year, according to a Bloomberg report, citing a client note from Goldman Sachs.

The central bank will double the pace of scaling back its liquidity-boosting asset purchases to $30 billion per month from the current $15 billion, Goldman economists said, predicting three rate hikes in 2022 and two in 2023.
The new projections mean the asset purchase program would end in March.
The investment banking giant expects the first rate hike from near zero will come in June.
“The increased openness to accelerating the taper pace likely reflects both somewhat higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets,” economists led by Jan Hatzius noted.
The Fed cut rates to nearly zero and began purchasing assets worth $120 billion per month following the coronavirus-induced crash of March 2020.
The massive liquidity injections led to unprecedented risk-taking across all corners of the financial market, including bitcoin.
Minutes from the Fed’s November meeting released Wednesday showed a growing number of policymakers were ready to speed up pace of the taper and raise interest rates if inflation continues to run high.
Faster unwinding of stimulus, if any, may weigh over bitcoin, which remains vulnerable to fed tightening, and asset prices, in general. The cryptocurrency fell almost 7% on Friday amid a massive pullback in the financial markets as concerns over a new coronavirus variant damped risk appetite.

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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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