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U.S. Federal Reserve to start scaling back stimulus in January

Updated: 2013-12-19 PM 8:08:34 (KST)
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The Federal Reserve announced Wednesday, that it will reduce its long-running bond purchasing program to 75 billion U.S. dollars a month, from previous 85 billion beginning next month.
Fed Chairman Ben Bernanke said the central bank's decision came as the U.S. economy shows strong signs of recovery.

"Despite significant fiscal headwinds the economy has been expanding at a moderate pace and we expect that growth will pick up in coming quarters helped by highly accommodative monetary policy and waning fiscal drag. The job market is continuing to improve with the unemployment rate having declined further."

He added the Fed will further taper the stimulus bond-buying program next year, if the economy continues to pick up.
To minimize any possible blow on financial markets, the Fed kept its record-low key interest rate near zero.
This suggests the rate will stay nearer the bottom line longer than previously expected.

"The committee also clarified its guidance on interest rates, emphasizing that the current near-zero range for the federal funds rate target likely will remain appropriate well past the time that the unemployment rate declines below six-and-a-half percent, especially if projected inflation continues to run past the committee's two percent longer run goal."

The announcement comes a little over a month before Bernanke steps down from his post as Fed chairman.
Bernanke said he closely consulted with the Fed's Vice Chair Janet Yellen,. who is expected to be the next Fed chair, and she fully supported the decision.
With the Fed's decisions on the stimulus and interest rates, both the Dow Jones Industrial average and the S&P 500 finished at record highs Wednesday.
Park Ji-won, Arirang News.


Reporter : jiwonpark@arirang.co.kr

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