Photo taken on Nov. 22, 2021 shows the U.S. Federal Reserve in Washington, D.C., the United States. (Photo by Ting Shen/Xinhua)

-- The announcement put the Fed on track to end asset purchases by March, earlier than initially expected of June.

-- Fed officials' median interest rate projections released Wednesday showed that the central bank could raise the benchmark interest rate three times next year, up from just one rate hike projected in September.

The U.S. Federal Reserve on Wednesday announced a faster tapering of the central bank's asset purchase program beginning in January amid the rising inflation.

"Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation," the Federal Open Market Committee (FOMC), the Fed's policy-making committee, said in a statement after a two-day policy meeting.

"In light of inflation developments and the further improvement in the labor market," the committee decided to reduce the monthly pace of its net asset purchases by 20 billion U.S. dollars for Treasury securities and 10 billion dollars for agency mortgage-backed securities, starting with the mid-January purchase schedule.

"The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook," the statement said.

The Fed in early November agreed to reduce its monthly asset purchase program of 120 billion dollars by 15 billion dollars. The announcement on Wednesday put the central bank on track to end asset purchases by March, earlier than initially expected of June.

"We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support," Fed Chairman Jerome Powell said Wednesday afternoon at a virtual press conference.

"In addition, a quicker conclusion of our asset purchases will better position policy to address the full range of plausible economic outcomes," Powell said.

Over the past several weeks, some Fed officials and economists have urged the central bank to accelerate the pace of tapering to give more leeway to raise rates sooner amid inflation pressures.

The consumer price index (CPI) rose 6.8 percent in November from a year earlier, the fastest annual pace in almost 40 years, according to the U.S. Labor Department.

Fed officials' median interest rate projections released Wednesday showed that the central bank could raise the benchmark interest rate three times next year, up from just one rate hike projected in September.

Fed officials also expected the U.S. economy to grow at 5.5 percent in 2021, lower than 5.9 percent estimated in September.

The Fed has pledged to keep the federal funds rate unchanged at the record-low level of near zero since the start of the pandemic.

"The bar for rate hikes now rests squarely on the labor market, with the statement indicating that the inflation threshold even under the Fed's new flexible regime has been met," Sarah House and Michael Pugliese, economists at Wells Fargo Securities, said Wednesday in an analysis.

"Market pricing over the next two years is roughly in line with the median projection for six cumulative rate hikes through year-end 2023, but beyond that markets are priced for very little additional tightening," they noted.