The Federal Reserve left interest rates unchanged at near zero on Wednesday, but said it would accelerate a reduction in bond purchases and signal up to three rate hikes next year to curb rising inflation.
The Fed said it would increase bond purchases to $30 billion a month in January, double the monthly rate of $15 billion announced in November.
The Fed cited "inflation developments and further improvement in the labor market" as factors in the central bank's decision to accelerate the pace of cuts in bond purchases.
This tightening move was largely expected after Fed Chairman Jerome Powell recently raised concerns about inflation and acknowledged that it was "time to pull back the [temporary] phrase."
The Personal Consumption Spending Price Index, the Fed's preferred inflation gauge, rose 0.6 percent in October, pushing the 12-month index through the end of October to 5%, much higher than with the Fed's 2% target.
The Fed's stance on inflation has some worried that the central bank could be forced to tighten policy more aggressively while the economy is expected to slow down in 2022.
The Federal Open Market Committee kept its benchmark interest rate unchanged in the range of 0% to 0.25%.
The faster rate of decline caused the bond-buying program to end in March, paving the way for a rate hike to take place in the spring of 2022.
