Fed Stimulus Taper Begins
December 18, 2013 by Sam Rolley
The Nation’s central bank will begin scaling back its massive bond-buying stimulus, reducing the amount of bonds it purchases to prop up the economy in monthly increments of $10 billion, the Federal Reserve announced Wednesday.
The Fed’s long-standing policy of buying $85 billion in bonds each month will begin to taper in January. During that month, the Fed said it will buy $30 billion in mortgage bonds and $40 billion in Treasury debt.
The Fed attributed the decision to “cumulative progress” in improving unemployment since it began its third round of quantitative easing in 2012.
“The committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy,” the Fed said in a Federal Open Market Committee statement.
In what was likely his final press conference, outgoing Fed Chairman Ben Bernanke said that economic recovery is well underway.
“We expect economic growth to be strong enough to support further job gains,” he said.
The chairman noted, however, that the central bank could reverse its decision to cut bond purchases based on economic indicators.
Representative Kevin Brady (R-Texas), the head of the Joint Economic Committee, released a statement following the Fed’s announcement, declaring, “It’s about time.”
“The Fed has finally taken the first step toward restoring a normal monetary policy. The seemingly endless doses of monetary morphine have served Wall Street well, but have done little to help struggling families on Main Streets across America. While this announcement is a positive first step, the Fed still has a long way to go,” Brady said.
On Wall Street, traders took the announcement of a Fed taper as good news, sending stocks soaring and ending the day with the Dow Jones Industrial Average up 300 points.