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Credit …Daniel Brenner / Bloomberg

Federal Reserve officials are preparing to pull back their economic aid as inflation remains stubbornly high and the labor market heals quickly, and they are signaling clearly that the recent business cycle is a bad template for what comes next.

During the economic expansion that stretched from the global financial crisis to the onset of the pandemic, the Fed traded very slowly – it gradually shifted back bond purchases intended to help the economy, and shrank its balance sheet of assets only explosively. Central bankers increased borrowing costs sporadically between 2015 and the end of 2018, increasing them at every other meeting at the most.

But inflation slowed, the labor market slowly crept out of the abyss, and business conditions needed the support of the Fed. This time around is different, a series of Fed presidents on Monday – suggesting that the pullback in policy support is likely to be faster and more decisive.

Four of the central bank’s 12 regional presidents spoke on Monday, and all suggested that the Fed could soon begin to cool the economy. Central bankers are expected to begin a series of interest rate hikes in March, and could begin to shrink their balance sheets fairly quickly shortly thereafter. The pace of policy withdrawal is still up for debate and officials have reiterated that it will depend on incoming data – but several markets also point out that economic conditions are unusually strong.

“The economy is much stronger than it has been, in any of my time in this role, and certainly, during one of the recovery we have sought in recent memories to navigate our policies,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in an interview with Yahoo Finance. All risks “that our policies will lead to a shrinkage in the economy, I think they are relatively far away.”

While it took the Fed a long time to begin one last time shrinking its balance sheet, the central bank is likely to move faster in 2022, suggested Esther George, president of the Federal Reserve Bank of Kansas City, during a speech.

“With inflation approaching close to a 40-year high, drawing momentum in demand growth, and abundance and reports of shortages in the labor market, the current highly accommodative stance of monetary policy is not in sync with the economic outlook,” said Ms. George, who is voting on monetary policy this year.

There are tricky questions about how big the balance sheet should be, she noted. The Fed’s assets have swelled to nearly $ 9 trillion, more than twice the size for the pandemic.

Ms. George estimates that the Fed’s large bonds weighed long-term interest rates by roughly 1.5 percentage points – almost half the interest rate on 10-year government debt. While the shrinking equilibrium risk markets are rolling, they warned that if the Fed remains a large presence in the treasury market, it could disrupt financial circumstances and jeopardize the prerogative of the central bank of the elected government.

“While it may be tempting to stray on the side of caution, the potential costs associated with over-balancing should not be ignored,” she said. She suggested that shrinking the balance sheet could allow policymakers to increase rates, which are currently set close to zero, by less.

Mary C. Daly, president of the Federal Reserve Bank of San Francisco, also advocates for an active – though still gradual – path to policy removal to help.

The Fed is not behind the curve, she said on a Reuters webcast, but it should respond to the reality that the labor market appears at least temporarily short on workers and inflation is hot. Prices picked up by 5.8 percent in the year to December, almost three times the 2 percent the Fed is aiming for on average and over time.

“We are not trying to combat some cruel wage-price spiral,” Ms. said Daly. However, she said she could support a rate hike as soon as March, adding that four rate hikes could be reasonable, a path that would slow things down while “not completely removing the punch bowl and causing disruption.”

However, she said it would be “wrong information” to suggest that officials are working together to find a clear path forward – the Fed will have to figure out how fast rates will increase as it learns more about the economy.

Wall Street economists expect an increasingly rapid pace for rate hikes this year: Goldman Sachs and JP Morgan both expect five exchange rate movements in 2022, and some Fed watchers have suggested that as many as seven are possible. Markets praise a small but significant chance that the Fed will increase rates by half a point in March, instead of a more typical increase of a fourth percentage point.

Officials have been wary of stressing that they do not know what will happen next with policies, because the economy is so uncertain – rents are rising and supply chains remain messy, which could keep inflation high, but government support programs are declining, which could weigh down question.

“We are not set on a particular trajectory,” Mr said. said Bostic.

Mr. Bostic had suggested in an interview with The Financial Times over the weekend that a half-point rate increase might be appropriate this year, a quick approach to withdrawing policy aid that was never used in the last expansion.

He told Yahoo on Monday that at this point he did not prefer an increase in supersize in March, although he saw this meeting “more and more” as the right time for the Fed to raise rates. Like George, Mr. Bostic also claims that this time was different when it comes to the Fed’s balance sheet.

“The economy is stronger,” he said. “And we have that previous experience that gives us some guidance on how markets are likely to react if that equilibrium shrinks. So I think we can be more robust in terms of how we do that.”

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