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U.S. Inflation Lights a Fire Under the Fed’s Monetary Policy

MIN READJun 22, 2021 | 18:31 GMT

The Federal Reserve building is seen on March 19, 2021, in Washington, D.C.

(DANIEL SLIM/AFP via Getty Images)

The U.S. Federal Reserve took no substantive action to tighten monetary policy during its last meeting, but it did convey a greater awareness of possible economic overheating. This indicates an interest rate hike may come sooner than expected, increasing risks for emerging markets that depend on dollar financing. The Fed did not change the federal funds rate, its main policy interest rate, when its policy-setting Federal Open Market Committee (FOMC) met on June 15-16. The U.S. central bank also did not adjust the size of asset purchases or forward guidance. But the Fed did signal that it will consider a withdrawal of quantitative easing (QE) -- a prelude to increasing interest rates, a process that could start this year with the first hikes arriving in 2022 or 2023. ...

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