(WASHINGTON) — Federal Reserve officials announced Wednesday that they intend to more rapidly end pandemic-era monetary policies meant to support the economy as surging inflation casts a new shadow over the recovery.

The U.S. central bank announced it would accelerate the tapering of its bond-buying program that flushed financial markets with liquidity during the coronavirus-induced downturn. Fed officials voted to keep interest rates near-zero currently, but indicated that they anticipated as many as three interest rate hikes starting in 2022.

“The path of the economy continues to depend on the course of the virus,” the Fed officials said in a policy statement Wednesday. “Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. Risks to the economic outlook remain, including from new variants of the virus.”

The policy shift comes on the heels of the Federal Reserve’s final meeting of the year, which ended Wednesday afternoon.

The committee decided during the meeting to “double the pace of reductions in its asset purchases,” Federal Reserve Chair Jerome Powell said in a post-meeting news conference, signaling the pandemic-era program could be halted completely by March.

“Beginning in mid-January, we will reduce the monthly pace of our net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities,” Powell said. “If the economy evolves broadly as expected, similar reductions in the pace of that asset purchases will likely be appropriate each month, implying that increases in our securities holdings would cease by mid-March, a few months sooner than we anticipated in early November.”

He added that they are phasing out purchases more rapidly because, “with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support.”

Powell also said supply constraints and bottlenecks have limited how quickly production can respond to recent rises in demand, resulting in elevated levels of inflation.

“These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus,” Powell said. “While the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, price increases have now spread to a broader range of goods and services.”

While Powell didn’t use the words “temporary” or “transitory” to describe inflation levels — as he and the Fed have previously — he did say inflation is expected to continue falling, to levels closer to the longer-run goal of 2%, by “the end of next year.”

“I think the Fed is showing that they’re taking this threat of higher inflation seriously, more seriously than they seemed to be before, but they still think that inflation should abate next year,” said Megan Greene, global chief economist at the advisory firm Kroll Institute and a senior fellow at the Harvard Kennedy School.

Greene said open-ended questions about changing labor force participation patterns and evolving consumer habits in the wake of the pandemic ultimately will have a big impact on how policymakers can react to inflation.

“There are fewer people in the labor force now than there were before the pandemic, and there’s a big question about whether that’s just the big structural change, or whether people might still jump in off the sidelines and get jobs,” Greene told ABC News. “And we’ve never been through this before, so we just don’t know, but if the labor force participation rate is just lower now, then the labor market is pretty tight and that makes sustained inflation a bigger threat.”

Americans also are changing their spending habits, she said.

“It’s not just that as the economy reopened and there’s a surge in demand, there’s also been a change in what we have a demand for,” she said. “In the 1960s, two-thirds of what we bought were goods. Right before the pandemic, two-thirds of what we bought were services.”

The pandemic reversed that decades-long shift, but it’s unclear whether it’s structural or related to lingering worries over the virus, according to Greene.

“All the inflation pretty much is in goods, so there’s a question, Is this just a change in our consumption habits now? Or is it that people are worried that going to the gym will land them in the hospital, so they’re not paying for those kinds of services anymore?” Greene told ABC News.

She said while the “jury’s out” on how this trend will play out as the pandemic ebbs, it’s something the Fed will have to figure out to better address inflation.

While the Fed’s projections indicate the possibility of up to three rate hikes in 2022, Greene suggests Americans take this with a “grain of salt” for now, saying that the data released Wednesday only indicates what each member of the Federal Open Market Committee thinks will happen “based on their own assumptions about inflation and growth and unemployment.”

The Fed’s policy shifts comes, meanwhile, as data indicates inflation hit a 39-year high last month. The government’s consumer price index, which measures the prices consumers pay for a basket of everyday goods and services, soared 6.8% in the last 12 months — the largest such increase since 1982.

The latest indicators inflation is tightening its grip on the U.S. economy have thrown a wrench in the Fed’s original plans to boost the economy throughout the pandemic.

Economists have attributed the rapidly climbing consumer prices largely to supply-demand imbalances lingering from the pandemic shock to the economy. Global supply chain issues, and an apparent shortage of workers accepting low-wage jobs in the service industry, have been linked to supply not being able to keep up with the surging consumer demand for goods and services as the pandemic wanes in the U.S. As a result, prices have been rising at a rapid clip.

The risk of inflation snowballing out of control, such as what was seen in the U.S. in the 1970s, makes it more difficult for the Fed to continue its easy monetary policy that was initiated during the pandemic — such as keeping interest rates low and injecting liquidity into financial markets. While these policies can help stimulate consumer demand, economists have linked the rising prices to issues clobbering the supply-side of the equation, not the demand side.

“We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation,” Powell said. “We are committed to our price stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”

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