The US Federal Reserve (Fed) has bitten the bullet: At their policy-making meeting on Dec 14 and 15 — in recognition of persistent high inflation — officials will announce a speedier tapering of asset purchases that have been supporting economic growth. The aim is now to complete the programme in time to be able to start raising short-term interest rates as soon as March should that prove necessary.

But the taper is not all that will be on the agenda at the meeting. Fed officials are also likely to signal a faster and larger tightening of monetary policy over the next three years — to an extent that markets have not yet anticipated.

The last time the Fed published officials’ economic projections — in September — the outlook was remarkably benign. They expected inflation to fall back close to the Fed’s 2% target, even as employment pushed past the level consistent with price stability. And they thought this pleasant outcome would require very little Fed intervention: Their median projection for the central bank’s short-term target rate at the end of 2024 was 1.8%, well below the 2.5% level most judged as neutral.

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