|
 The action was widely expected, although some investors had
speculated that the U.S. central bank might put its plans on hold
given the jitters overseas.
Fed Chairman Ben Bernanke, who hands the Fed's reins to Vice Chair
Janet Yellen on Friday, managed to adjourn his last policy-setting
meeting without any dissents from his colleagues. It was the first
meeting without a dissent since June 2011 — a sign of how tumultuous
Bernanke's tenure has been.
In addition to proceeding with plans to scale back its bond buying,
the Fed made no changes to its other main policy plank: its pledge
to keep interest rates low for some time to come.
The decision suggests that it would take a serious threat to the
U.S. economy before the Fed backs down from a resolve to shelve the
asset-purchase program later this year.
Indeed, it offered a somewhat rosier assessment of the U.S.
economy's prospects than it did last month, saying "economic
activity picked up in recent quarters." It also largely shook off
surprisingly soft jobs growth in December. "Labor market indicators
were mixed but on balance showed further improvement," it said.
"They really want to move to the sidelines here and get out of the
(bond buying) business," said Jack Ablin, chief investment officer
at BMO Private Bank in Chicago.
All 17 top Wall Street economists polled by Reuters on Wednesday
expect the Fed to wind the program down by year's end, and nearly
all believe the Fed won't raise rates until at least the third
quarter of 2015.
Major U.S. stock indexes closed down more than 1 percent, while
yields on the benchmark 10-year Treasury note hit the lowest level
since late October. The dollar rose against the euro but was little
changed against a broad basket of currencies.
ENDING THE PURCHASES
Importantly, the Fed stuck to its promise to keep rates near zero
until well after the U.S. unemployment rate, now at 6.7 percent,
falls below 6.5 percent, especially if inflation remains below a 2
percent target. Some analysts had speculated it might alter this
guidance, given how close the jobless rate now is to the rate-hike
threshold.
In fact, the central bank's statement largely mirrored the one it
issued after its December 17-18 meeting, when it announced an
initial $10 billion cut to its monthly bond purchases.
At the time, Bernanke told reporters the Fed would likely continue
to taper the purchases in "measured" steps through the year until it
was fully wound down, as long as the economy continued to heal. He
did not speak to the media on Wednesday.
In its statement on Wednesday, the Fed said it would buy $65 billion
in bonds per month starting in February, down from $75 billion now.
It shaved its purchases of U.S. Treasuries and mortgage bonds
equally.
[to top of second column] |
"The Fed's action today represents a continuation of its resolute
determination to end (bond purchases) during 2014," said Daniel
Alpert, managing partner at Westwood Capital in New York. "The
policy has hit its 'sell by' date."
FOCUSED ON HOME
In announcing its decision, the Fed made no reference to the
sell-off in emerging markets that has depressed U.S. stocks in
recent days.
Markets in countries with large current account deficits, such as
Turkey and Argentina, have suffered steep losses in part because of
the prospect of less U.S. monetary stimulus.
These currencies and stocks slumped again after the Fed's
announcement, offsetting aggressive interest rate hikes by Turkey
and South Africa.
Meanwhile, economic signals in the United States — from consumer
spending to industrial production and trade — have suggested the
U.S. recovery closed out last year on solid ground, reinforcing
expectations the Fed would continue trimming the stimulus. The weak
December jobs report has been viewed as an outlier.
The central bank launched its current round of bond purchases in
September 2012, its third such effort since the darkest days of the
financial crisis in late 2008.
The effort to bring the purchases to a halt will now fall to Yellen,
who has strongly backed the unprecedented actions the Fed has taken
to boost growth and get more Americans back to work. She will chair
her first policy meeting on March 18-19.
Bernanke, a professor and leading scholar of the Great Depression
before joining the Fed, took the central bank far into uncharted
territory during his eight years on the job, building a $4 trillion
balance sheet and keeping interest rates near zero for more than
five years to pull the economy from its worst downturn in decades.
(Reporting by Jonathan Spicer and Jason
Lange in Washington; additional reporting by Ann Saphir in San
Francisco; editing by Tim Ahmann, Paul Simao and Ken Wills)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
