With Fed taper expected, investors brace for rate hikes on horizon

(Reuters) As the U.S. Federal Reserve gears up to taper its huge asset purchases, investors reeling from gyrations in the bond market are scanning the road ahead for signs of how effectively the central bank can tighten policy to deal with stubbornly high inflation.

At their meeting this week, Fed policymakers are expected to give the green light to reducing the central bank’s bond purchases which have seen it hoover up $120 billion a month in government-backed bonds in a bid to steady the economy after the hit from the pandemic.

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