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US Fed Policies Send Stocks to Record Highs

U.S. stocks closed at record highs Wednesday after the central bank decided to maintain current efforts to stimulate the economy.

The Dow Jones Industrial Average rose 1 percent while the Standard & Poors 500 closed 1.2 percent higher. The NASDAQ index also was up 1 percent.

Investors showed confidence Wednesday by buying stocks after Federal Reserve Chairman Ben Bernanke said there will be no change in the Fed's program to buy $85 billion a month in securities.

The program is intended to reduce long-term interest rates, which makes it easier for companies to buy new equipment and for families to buy new homes. Many economists expected officials to reduce that by billions of dollars.

But Bernanke said the economy still needs help because unemployment is still too high.



He said Fed policymakers need more evidence the economy is improving before trimming the asset purchases.

The U.S. economy, the world's largest, is still recovering from its worse recession in decades.

Fed officials also have been trying to speed up economic growth by pushing short-term interest rates down to almost zero. Bernanke said the Fed will keep short-term rates at record lows for some time.

The Fed has to strike a careful balance in stimulus efforts. If it cuts back too soon, the U.S. economy could fall back into recession. If it over-stimulates the economy, it could bring on inflation and cause serious problems.

OPTIONAL BERNANKE SOUNDBITE:
"The committee concluded that the economic data did not yet provide sufficient confirmation of its base-line outlook to warrant such a reduction."

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