The FOMC also announced last week that starting June 1st, it will begin reducing the size of its holdings of U.S. Treasury securities and agency debt and agency mortgagebacked securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet.2 The reduction of the balance sheet will play out over the next few years, eventually bringing the Federal Reserve's securities holdings to a level consistent with the ample reserves framework that the FOMC reaffirmed in January when it released its principles for balance sheet reduction.3  Economic Outlook Even before it took these actions, the FOMC communicated a path of raising the target federal funds rate and reducing the balance sheet. Those communications and subsequent actions are having a meaningful effect on broad financial conditions. For example, since the beginning of the year, both two-year Treasury yields and 30-year fixed mortgage rates have risen more than 2 percentage points. We have seen a significant tightening of financial conditions abroad as well. Our monetary policy actions will cool the demand side of the equation. I also expect that over time, the factors contributing to supply shortages will be resolved, so that some of the rebalancing will be accomplished through increases in supply, both in the United States and around the world. For 2022, I expect core PCE inflation to be nearly 4 percent, before falling to about 2 ½ percent next year. I expect inflation to further decline to close to our 2 percent longer-run goal in 2024.
This will also turn down the heat in the labor market, reducing the imbalance between job openings and available labor supply. 2/4  BIS - Central bankers' speeches  While the Federal Reserve on its own cannot address the global nature of inflation, we are not acting alone. Many other central banks are also taking steps to curb inflation. Taken together, these actions should help restore balance to supply and demand globally. That, in turn, should help diminish supply-chain bottlenecks and reduce inflationary pressures. Taking Action In the United States, the FOMC is taking strong actions to restore balance and bring inflation down. So far this year, the FOMC has raised the target range for the federal funds rate by 75 basis points, including a 50-basis-point increase announced after our meeting last week.1 In addition, the FOMC has indicated that it anticipates that ongoing increases in the target range will be appropriate. I expect the FOMC will move expeditiously in bringing the federal funds rate back to more normal levels this year.