We talking about practice

While delivering no change in policy and little change in its economic outlook beyond this year, the FOMC shifted its guidance in a hawkish direction this week. The “talking about tapering” balance sheet policy that began at the meeting was expected. However, the median forecast for the start of normalization moved more forcefully forward with seven committee members now projecting rate hikes next year. This shift largely reflects a fading of the pandemic- related risks that likely kept most Fed official cautious through the March meeting. Since then, boomy growth and rapidly rising rates of vaccination have reduced recovery concerns, while vigorous inflation—even if bottleneck- related—has refocused attention to medium-run risks. This shift brings the Fed into closer alignment with markets, which have been pricing 2023 hikes for some time.