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Federal Reserve chair Jerome Powell. Photo: Kevin Dietsch/Getty Images

The Federal Open Market Committee on Wednesday laid out a framework for reducing — or tapering — the emergency bond purchases it's been making since March 2020.

Why it matters: These purchases, totaling $120 billion per month, were a keystone in the federal government's rescue of financial markets, which went into free fall soon after countries around the world instituted widespread stay-at-home orders.

  • More recently, as the U.S. economic recovery has picked up steam, critics have called on the Fed to pull back on the support to keep the economy from overheating and keep inflation in check.

The big picture: As expected, the Fed is keeping the federal funds rate at zero for now.

  • Fed chair Jerome Powell stressed at the press conference that he's not even thinking about a rate liftoff yet.
  • "We didn't have that discussion at today's meeting," he said. "We did talk about the economy, and the development of the economy, but we didn't ask ourselves whether the liftoff test is met, because [the test] is clearly not met on the maximum employment side."

But inflation is higher than Powell had expected. "Bottlenecks have been more persistent and more prevalent. We see that just like everybody else does, and we see that they're now on track to persist well into next year," he said.

  • Acknowledging that higher prices hit those living paycheck-to-paycheck hardest, Powell said the Fed will "will use our tools over time to make sure [inflation] doesn't become a permanent feature of life."
  • The Fed's view on inflation is that it still largely reflects factors that “are expected to be” transitory.

State of play: On the tapering front, the Fed said that it will begin to pare back its bond purchases this month.

  • Currently, it's buying $80 billion in Treasury bonds and $40 billion in mortgage-backed securities every month — and it will reduce those purchases to $70 billion and $35 billion, respectively.
  • The Fed will cut purchases further in December, to $60 billion in Treasuries and $30 billion in mortgage securities.
  • The Fed aims to continue reducing its purchases by a total of $15 billion per month after that, though it is prepared to adjust that if needed.

Markets reacted positively to the news, "which highlights how well the Fed telegraphed the decision to taper," commented Cliff Hodge, CIO for Cornerstone Wealth, in a note.

What's next: Before making a move on raising rates, Powell wants to see how the labor market progresses outside the context of the Delta variant, which arrested the pace of jobs growth during the late summer and early fall.

  • The October employment report, which will shed some light on this, is due out Friday morning.

Editor's note: This story has been updated throughout and corrected to reflect that all dollar amounts are in the billions.

Go deeper

The U.S. isn’t alone: Over 35 countries hit with inflation

Expand chart
Data: OECD, reproduced from Pew Research Center; Chart: Axios Visuals

Inflation in the U.S. has risen during the past two years at the third-fastest rate out of 46 Organization for Economic Cooperation and Development and other economically significant countries.

The big picture: Rising prices aren’t just a problem in the United States. Thirty-nine of the countries analyzed by the Pew Research Center saw inflation increase between the third quarter of 2019 and the third quarter of this year.

JPMorgan: "Full global recovery" in 2022

Photo: Erik McGregor/LightRocket via Getty Images

JPMorgan Chase Global Research says in a forecast to clients: "2022 will be the year of a full global recovery, an end of the global pandemic, and a return to normal conditions we had prior to the COVID-19 outbreak."

The big picture: The bullish report sees "a return of global mobility, and a release of pent-up demand from consumers (e.g. travel, services)."

Inside Trump's hunt for "disloyal" Republicans

Illustration: Aïda Amer/Axios

Donald Trump and his associates are systematically reshaping the Republican Party, working to install hand-picked loyalists across federal and state governments and destroy those he feels have been disloyal, sources close to the former president tell Axios.

Why it matters: If most or all of Trump’s candidates win, he will go into the 2024 election cycle with far more people willing to do his bidding who run the elections in key states.