Fed to start scaling back $120bn a month bond-buying support

America’s central bank has confirmed that it is to start scaling back its emergency support for the US economy.

The US Federal Reserve said that it will start reducing its $120bn a month programme of bond purchases by $15bn a month, which should mean they will end altogether by June.

It comes a day before a Bank of England policy announcement which is expected by many experts to see interest rates in the UK hiked by 0.1% to 0.25%.

Economic recovery – and increasing inflation – have put pressure on both central banks to start pulling back emergency support which was designed to cushion the US and the UK from the impact of the coronavirus crisis.

But while scaling back its bond purchases “in light of the substantial further progress the economy has made”, the Fed has left US interest rates on hold at close to zero.

It stuck to its insistence that the factors driving inflation higher “are expected to be transitory”.

Fed chairman Jerome Powell said the announcement was not a “direct signal regarding our interest rate policy”.

He told a news conference: “We think we can be patient. If a response is called for, we will not hesitate.”

The US economy had recovered to its pre-pandemic peak by the middle of this year.

However, growth and hiring stumbled in the third quarter, partly because a surge in delta variant coronavirus cases discouraged many people from travelling, shopping and eating out, as well as supply chain woes.

US stock markets largely shrugged off the Fed’s announcement, which was widely expected.