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Interest rates rose, too. The increase particularly in mortgage rates, before the Fed had even begun to change policy, alarmed the central bank. Higher mortgage rates could dampen the gains in housing, which has been a rare bright spot for the economy. In explaining its decision to maintain the pace of its purchases, the Fed expressed concern in September that higher rates, if sustained, could slow any improvement in the job market and the economy. Given the panic among investors when Bernanke raised the prospect that the Fed would slow its bond purchases, analysts think any pullback will be very gradual. That's especially true if a pullback starts in March or later, when Yellen would be chairman and considering her first major policy move. "The one thing Janet Yellen will not want to do is start her term by making a mistake," said Brian Bethune, an economics professor at Westmont College in Santa Barbara, Calif. "She will be extremely cautious and will try to signal that the Fed is starting to back off its bond purchases without causing the kinds of effects we saw in the summer." This week's meeting is the first since Obama announced Oct. 9 his choice of Yellen to be chairman. David Jones, chief economist at DMJ Advisors and the author of several books on the Fed, said her status could change the dynamics this week. "Bernanke is essentially a lame duck, and Yellen has not yet taken over," Jones said. "It will make the Fed more cautious." Sen. Rand Paul, R-Ky., has said he will oppose Yellen's nomination unless the Senate votes on a bill he's sponsoring to subject the Fed's rate decisions to review by the Government Accountability Office. Yellen is expected to win Senate confirmation. But Paul's efforts could slow the process. The Senate Banking Committee is considering holding a hearing on Yellen's nomination on Nov. 14. But a vote by the full Senate might not come until January. Once the Fed starts trimming its bond purchases, economists foresee reductions of $10 billion to $20 billion a month as long as the economy improves consistently. Some analysts think the Fed could finish its purchases by the end of 2014. "But if something goes wrong, then they will stop or at least slow down the reductions," said David Wyss, a former chief economist at Standard & Poor's and now an economics professor at Brown University.
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