The Federal Reserve closed a chapter on its aggressive, pandemic-driven stimulus when it approved plans Wednesday to begin scaling back its bond-buying program this month amid concerns that inflationary pressures could last longer than officials expected earlier this year.

Fed officials agreed to wind down their $120-billion-a-month asset-purchase program by $15 billion each in November and December, a pace that could phase out the purchases entirely by next June.

Fed...

The Federal Reserve closed a chapter on its aggressive, pandemic-driven stimulus when it approved plans Wednesday to begin scaling back its bond-buying program this month amid concerns that inflationary pressures could last longer than officials expected earlier this year.

Fed officials agreed to wind down their $120-billion-a-month asset-purchase program by $15 billion each in November and December, a pace that could phase out the purchases entirely by next June.

Read the Fed’s statement on monetary policy

Fed Chairman Jerome Powell said officials had pulled forward, relative to market expectations earlier this year, the potential end-date for the bond-buying program in case they decide they need to raise interest rates next year to cool down the economy if inflationary pressures broaden.

“We need to be in a position to act in case it becomes necessary to do so,” he said at a press conference Wednesday.

Mr. Powell played down the prospect of an imminent turn to raising interest rates, which rallied markets that had been spooked by other central banks’ recent pivots toward tightening policy.

Broad U.S. stock indexes notched fresh highs on Wednesday. S&P 500 rose about 0.7%. The yield on the benchmark 10-year U.S. Treasury note rose to 1.577%, up from 1.546% on Tuesday. Bond yields and prices move in opposite directions.

The Fed cut its short-term benchmark rate to near zero when the coronavirus pandemic hit the U.S. economy in March 2020. It held rates at that level on Wednesday.

It also has been buying at least $80 billion in Treasurys and $40 billion mortgage securities every month—initially to stabilize financial markets and later to hold down longer-term interest rates. The Fed’s holdings of those securities has more than doubled since March 2020 to around $8 trillion.

The Fed said it would reduce asset purchases by $15 billion a month, but reserved the prospect of accelerating or slowing down that pace “if warranted by changes in the economic outlook.” Officials don’t want to lift rates until after they have ended the bond purchases.

Mr. Powell declined to specify under what circumstances the Fed might speed up the reductions, or “taper,” of its asset purchases, leading to some disagreement among analysts after the meeting.

Brisk demand for goods, disrupted supply chains, temporary shortages and a rebound in travel have pushed 12-month inflation to its highest readings in decades. Core inflation, which excludes volatile food and energy prices, rose 3.6% in September from a year earlier, according to the Fed’s preferred gauge.

Diane Swonk,

chief economist at accounting firm Grant Thornton, said she thought inflation might stay high enough that the central bank would feel pressure to accelerate the taper next year.

“Even if inflation abates, if it’s not cooling down enough, that is a hard situation to be in. You want to be done with tapering sooner,” she said. “I wish they could have done it sooner.”

Others disagreed. “The bar for them to speed this up is still quite high,” said Neil Dutta, an economist at research firm Renaissance Macro. “If inflation is firm but the number of workers returning to the labor force is recovering, the Fed still has a good story to tell.”

Mr. Dutta said that as long as more people return to the workforce, the rate of wage growth should slow even if aggregate incomes rise, keeping inflation in check. “If Covid is the reason why people aren’t working, then as Covid goes away, those things should look a little better,” he said.

The Markets React to the Fed: Stocks Hit Records as Fed Scales Back Bond Buying

From April through September, the Fed’s statement described high inflation as “largely reflecting transitory factors.” Wednesday’s statement included additional language to characterize why officials still expect prices to decline.

Mr. Powell said the rate-setting committee wanted to “take a step back from transitory,” which is a word that has become increasingly confusing, he added. “It means different things to different people,” he said. “For some, it carries a sense of ‘short-lived’” or a time interval “measured in months, let’s say. Really, for us, what transitory has meant is that it will not [lead to] permanently or very persistently higher inflation.”

The changes to the statement, Mr. Powell said, also acknowledged greater uncertainty about the Fed’s expectation over how soon inflation would slow.

Since officials’ previous meeting in September, inflation data have hinted at a potential broadening in price pressures and shown that prices for certain items such as used cars, which witnessed sharp gains earlier this year, have started climbing once more.

“What’s happened—and we’re very, very straightforward about it—is that inflation has come in higher than expected, and bottlenecks have been more persistent and more prevalent,” said Mr. Powell. “We see that just like everybody else does, and we see that they’re now on track to persist well into next year.”

Mr. Powell said the central bank hoped to see inflation moving down by next spring or summer. He also said it was possible that labor-market conditions by the second half of next year could be consistent with the Fed’s goal of maximum employment, which would be sufficient to justify higher interest rates.

“It’s certainly within the realm of possibility,” he said.

Mr. Powell also acknowledged more explicitly how higher demand was contributing to kinks in supply chains. “Our policy will adapt, and has already adapted, to the changing understanding of inflation, and of bottlenecks and the whole supply-side story, which is also partly a demand story,” he said.

Higher inflation readings and other central banks’ actions have led bond investors to anticipate that the Fed will raise rates next summer, after it stops buying bonds, and again later in the year.

Mr. Powell has been seeking a middle ground that assures investors the Fed is closely monitoring inflation risks while not appearing so worried that he leads markets to anticipate an even faster shift to tighter money. The expectation that inflation-adjusted interest rates will remain low have buoyed global asset prices. The Fed risks triggering new economic or financial stress by shifting abruptly.

“We think we can be patient,” he said. “If a response is called for, we will not hesitate.”

Looming in the background of Wednesday’s policy pronouncements were questions over who will lead the central bank next year. Mr. Powell is set to lead two more policy-setting meetings before his term expires in February. President Biden told reporters on Tuesday that he would announce decisions “fairly quickly” on whether he was offering Mr. Powell another term or tapping someone else to succeed him.

Some Fed officials have said they are nervous that a longer episode of higher prices could threaten a 25-year trend of inflation that has held around their 2% goal. A related risk is that the recent pattern of supply-chain disruptions lingers into 2022 and beyond.

Mr. Powell cited both higher uncertainty over whether the economy would return to its pre-pandemic equilibrium and continued optimism around that prospect. “We have a flexible economy. It will take some time,” he said. “But experts managed to create a vaccine faster than I expected, and I think this stuff will work itself out over the course of next year.”

Then he added a caveat: “But we are prepared for different eventualities.”

Write to Nick Timiraos at nick.timiraos@wsj.com