News / Economy

US Fed to Scale Back Bond Purchases Starting January 2014

US Fed to Scale Back Bond Purchases Starting January 2014i
X
December 19, 2013 3:07 AM
The U.S. Federal Reserve will start scaling back its monthly bond-buying program as early as next month. But the reduction will be gradual. The Federal Reserve has been buying $85 billion a month in government bonds in an effort to keep interest rates low and boost economic growth. As Mil Arcega reports, outgoing chairman Ben Bernanke says the stimulus is working.
The U.S. Federal Reserve will start scaling back its monthly bond-buying program as early as next month. But the reduction will be gradual.  The Federal Reserve has been buying $85 billion a month in government bonds in an effort to keep interest rates low and boost economic growth.  As Mil Arcega reports, outgoing chairman Ben Bernanke says the stimulus is working.

Ever since the U.S. central bank introduced the latest round of monetary stimulus 12 months ago, long-term interest rates have remained near zero and unemployment has fallen a full percentage point.  As a result, the Federal Reserve says it's time to begin reducing its bond purchases by $10 billion starting in January.

Fed Chairman Ben Bernanke says the decision reflects the committee’s confidence in the U.S. recovery.

“Notably despite significant fiscal headwinds, the economy has been expanding at a moderate pace, and we expect that growth will pick up somewhat in coming quarters," said Bernanke.

Although inflation remains well below levels that would suggest growth, the Fed says the economy is likely to expand at an annualized rate of about 3 percent - with unemployment falling to about 6.5 percent by the end of 2014.

Bernanke says further reductions in bond purchases will take place in measured steps, depending on economic conditions.

“If the economy slows for some reason or we are disappointed in the outcomes, we could skip a meeting or two.  On the other side, if things really pick up, then of course we could go a bit faster.  But my expectation is for similar moderate steps going forward throughout most of 2014," he said.

Stocks surged on Wall Street following the announcement.  Even though many investors were expecting the Fed’s bond purchases to remain at current levels until March, economist Uri Dadush said the impact of the so-called “taper” was anticipated the moment Bernanke hinted at the possibility in May.

“In a sense, the effect of tapering has already occurred, you know because [REPORTER: it’s already been factored into the markets?].  What I’m saying is that the moment Mr. Bernanke made his speech, mortgage rates went up by a hundred basis points," said Dadush.

Despite the improved outlook, Bernanke warns the economy still needs the Fed's support. Bernanke, who is set to step down in January, says his replacement is committed to keeping interest rates near record lows until unemployment falls well below 6.5 percent.

You May Like

Video Five Patients Given Experimental Ebola Drug Said To Be Improving

Experimental drugs have been tried on six people: three Westerners and now, three African pyhysicians More

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As Ukrainian military reclaims control of eastern cities residents rebuild their lives, but many say everyone is being treated with suspicion More

Video In Rural Kenya, Pressure Builds Against Female Circumcision

Girls learn to object; FGM practitioners face penalties from jail sentences to stiff fines More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Five Patients Given Experimental Ebola Drug Said to Be Improvingi
X
Carol Pearson
August 19, 2014 11:43 PM
The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.
Video

Video For Obama, Racial Violence is Personal Issue

The racial violence in the St. Louis suburb of Ferguson is presenting U.S. President Barack Obama with an issue to which he has a deep personal connection. To many Americans, Obama's election as America's first black president marked a turning point in race relations in the United States, and Obama has made ending the violence a policy priority. On Monday he issued a new call for calm and understanding. Luis Ramirez reports from the White House.
Video

Video Clinton-Obama Relationship Could Impact 2016 Election

President Barack Obama and former Secretary of State Hillary Clinton have a long and complicated relationship. That relationship took another turn recently when Clinton criticized the president’s foreign policy. VOA National Correspondent Jim Malone reports there is renewed attention on the Clinton-Obama relationship as Hillary Clinton considers running for
Video

Video Iran Looks to Maintain Influence in Baghdad With New Shia PM

Washington and Tehran share the goal of stopping Syrian-based militants in Iraq. But experts say it's Iran, not the United States, that will most influence how the new government in Baghdad approaches internal reforms and the war in Syria. VOA State Department Correspondent Scott Stearns has the story.

AppleAndroid

World Currencies

EUR
USD
0.7492
JPY
USD
102.27
GBP
USD
0.5960
CAD
USD
1.0950
INR
USD
61.300

Rates may not be current.