Fed announces taper: $15B/month reduction in bond purchases

The FOMC announced on November 3 2021 it would begin reducing monthly asset purchases by $15B ($10B Treasuries, $5B MBS), with flexibility to adjust. Chair Powell framed tapering as distinct from rate hikes and emphasized patience on policy normalization. The statement retained "transitory" for inflation language, a decision that would be reversed at the December meeting.

Markets rallied on the announcement, a textbook "hawkish dove" reaction. The taper was fully priced by late October, and equity investors welcomed the lack of accelerated hawkishness. Treasury yields fell modestly, with the 10Y dropping 3 bps to 1.59%. Equities closed at record highs across the S&P 500, Nasdaq 100, and Dow. The decoupling of taper and rate hike expectations would last roughly two months before the December pivot.

The session established the initial taper template that would be recalibrated sharply in December as inflation data continued to accelerate. November CPI would print 6.8% YoY, and the December FOMC doubled the taper pace to $30B/month while pulling forward expected rate hikes. The November session marked the high-water mark for "transitory" inflation framing.