In view of stubborn inflation, the US Federal Reserve (Fed) is considering tightening its monetary policy a little faster than previously planned.

The November decision of the Fed to reduce the monthly bond purchases by 15 billion dollars until they are completely stopped by the middle of next year is now up for discussion.

Winand von Petersdorff-Campen

Business correspondent in Washington.

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Markus Frühauf

Editor in business.

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Fed chairman Jerome Powell said at the congressional hearing that it would look into ending the purchase program a few months early.

This prepares a quicker reduction of the so-called quantitative easing.

This follows from a reassessment of the inflation risk.

The indicator preferred by the Fed shows an inflation rate of 5 percent over twelve months at the end of October.

The Fed is pursuing an inflation target of 2 percent.

Up until the last monetary policy meeting of the Fed, the central bankers had stuck to the formulation that high inflation was a temporary phenomenon that did not justify any interest rate policy steps.

The Fed is now distancing itself from the assumption that prices will only remain high for a short time.

The Fed continues to expect a significantly lower rate in the coming year

Powell and his colleagues continue to expect that inflation will ease significantly in the coming year when delivery problems and demand peaks diminish. Nevertheless, it is difficult to predict when the international supply chains will function smoothly again. It shows, however, that the factors that drove up inflation extended well into next year.

In addition, the rapidly improving situation on the American labor market and the sharp rise in wages are the driving forces behind higher prices.

The unemployment rate was 4.6 percent in November and the number of vacancies remained at a record level of more than ten million.

It is time to retire the phrase "temporarily" to describe inflation, Powell said.

"The risk of higher inflation has increased," he added.

The prediction is made more difficult by the appearance of the new Coronavirus variant Omikron.

The Delta variant had slowed America's economic recovery in the third quarter.

Omikron could persuade Americans to stay at home instead of traveling, going to restaurants or filling vacancies.

Corona caused many consumers to buy more goods instead of services

The pandemic had led many Americans to focus their consumption generally on goods rather than personal services.

This had led to higher prices, such as the delivery bottlenecks caused by logistics and production problems as well as a lack of labor.

The combination of these factors could now fuel inflation further.

An alternative scenario is that Omikron generally dampens economic activity because companies and consumers postpone purchasing decisions.

Above all, this would give production and logistics companies time to work off backlogs and could lower energy prices.

Powell showed a new focus on inflation more clearly than in previous statements, after his previous comments were mainly shaped by the achievement of the monetary policy goal of maximum employment.

The Fed is also looking at the increase in key interest rates, which are currently between zero and 0.25 percent, as can be seen from his statements.

"To get back to the great job market we had before the pandemic, we're going to need price stability," Powell said.

Persistently high inflation is a high risk on the way to a healthy labor market.

Government bond prices fell after Powell's statement

Powell's remarks pushed US government bond yields up, with fixed income falling prices.

In the ten-year term, the return rose to 1.5 percent at times.

However, in mid-October it was still 1.7 percent.

The earlier end of the Fed's purchase program had still weighed on the American stock market on Tuesday.

But on Wednesday there was a recovery on the stock exchanges.

The German stock market index Dax rose at times by 2 percent to 15,408 points.

On Wall Street, the Dow Jones index rose 0.8 percent to 34 755 points during trading.

Market participants attributed the recovery to a more relaxed assessment of the Omikron risks.

The chief investment strategist of asset management at the Swiss bank UBS, Mark Haefele, expects that the attention of investors will gradually shift away from the Omikron variant and towards economic growth and rising profits.

Powell's latest inflation predictions supported investor confidence in growth.

The ECB still sees inflation as a temporary phenomenon

In contrast, the European Central Bank (ECB) recently stuck to its assessment that inflation was only a temporary phenomenon.

President Christine Lagarde said in an interview with the Frankfurter Allgemeine Sonntagszeitung that this rise in inflation will not last and will calm down in the next year.

The willingness to hold on to the bond purchase program and the very expansionary monetary policy for the time being had weakened the euro against the dollar.

The European common currency was traded below $ 1.12 at times in the past week, but recovered to $ 1.1348 by Wednesday.

On December 16, the ECB will decide on its monetary policy.

In addition to the turnaround by the Fed, it is putting high inflation under pressure.

In Germany, prices rose by 5.2 percent in November, more than they have been in 29 years.