U.S. central bank rolls out plan for slowing stimulus this year and rate hikes in 2022

With markets on edge from a series of recent disruptions, this is no time for another taper tantrum, where stocks tumble on the news that stimulus may come to an end. Nonetheless the U.S. central bank has officially revealed plans to slow down its purchase of bonds and begin raising interest rates.

Despite worries over a spreading property meltdown in China, rising delta cases, a fight over the debt ceiling in Washington and worldwide concern over the impact of higher rates on public and private borrowing, U.S. Federal Reserve chair Jerome Powell said Wednesday that he is confident it is finally time to plan an end to pandemic stimulus.

There are two stages to the rollback in monetary stimulus that will gradually make money harder to borrow. The first, Powell projects, will come as soon as November, when the world's largest central bank scales back, or tapers off on its weekly purchase of billions of dollars in bonds. That process could be complete by mid-2022.

But just because he's now finally talking about cutting stimulus doesn't carve this path in stone. 

In the past, such announcements that the Fed was beginning progress to cut monetary stimulus has resulted in a wave of stock-market selling, dubbed a taper tantrum, as traders adjust to the idea that an era of bargain borrowing is coming to an end.

To those not familiar with the process, the reason for a market tantrum may require a little explanation.

Besides cutting official interest rates almost to zero, central banks around the world, including the Bank of Canada, have been buying bonds to force interest rates on things like mortgages and business loans even lower, as deputy governor Paul Beaudry has explained.