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Stocks rise after Fed signals rate hike in 2022


The Federal Reserve will complete its pandemic-era stimulus more quickly and is expected to raise interest rates in 2022 more than it expected in September.

The central bank, which first announced in November that it was ‘reducing’ its monthly asset purchases, on Wednesday said it would do so at a faster pace.

Starting in January, the Fed will buy $20 billion less in Treasury securities and $10 billion less in mortgage-backed securities. That leaves the monthly shopping list at $40 billion for Treasury securities and $20 billion for mortgage-backed securities.

This is consistent with what Federal Reserve Chairman Jerome Powell told Congress in late November.

The December policy meeting also included a summary of economic projections, the so-called “dot plot”.

Fed officials now expect the central bank’s benchmark interest rate to rise to 0.9% in 2022, up from a 0.3% expectation from September, signaling additional rate hikes.

Market expectations for a rate hike will increase in May next year, according to CME FedWatch Tool.

Read more about the Fed’s policy update here.

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