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Fed to start to cut stimulus programme


Fed to start to cut stimulus programme


The US Federal Reserve has announced it will trim its aggressive bond-buying programme.

In what amounts to the beginning of the end of its unprecedented support for the US economy, the central bank said it would reduce its monthly asset purchases by $10 billion to total $75 billion.

It trimmed equally from mortgage and Treasury bonds.

The Fed also said its key interest rate would stay lower for even longer than previously promised.

The move was a nod to better prospects for the economy and the job market and marks a historic turning point for the largest monetary policy experiment ever.

On Wall Street share indxes initially plunged after the release of the statement, but quickly rebounded and turned positive.

“I think people were prepared for this, and I think they are relieved that the Fed is starting. No one wanted this 800-pound gorilla in the market,” said Wayne Kaufman, chief market analyst at Rockwell Securities in New York.

In a move likely meant to forestall any sharp market reaction that could undercut the recovery, the central bank said it “likely will be appropriate” to keep interest rates near zero “well past the time” that the jobless rate falls below 6.5 percent.

The Fed’s latest so-called quantitative easing programme, or QE, was launched 15 months ago to kick-start hiring and growth in an economy that was recovering only slowly from the Great Recession. The Fed’s first QE programme was launched in the midst of the 2008 financial crisis.

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