Fed Cuts Bond Buys By $10 Billion Per Month

Dec 18 2013 | 3:38pm ET

In a somewhat surprising move, the Federal Reserve today said it would begin to pare back on its quantitative-easing stimulus program.

The Fed, which has been buying $85 billion in bonds each month, capped months of discussion and a few close calls with the move, which will reduce long-term Treasury bond purchases by $5 billion per month and mortgage-backed securities purchases by the same amount. The Fed also said it would keep short-term interest rates near zero deep into the foreseeable future, with unemployment still above its 6.5% threshold and inflation still far below its 2% target.

"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace of its asset purchases," the Fed said.

The current round of quantitative easing began in September of last year, although the Fed began buying bonds in November 2008. The central bank was widely expected to begin tapering those purchases in September, but when it did not, many expected the current levels to outlast Fed Chairman Ben Bernanke, whose term ends next month.

In October, Appaloosa Management founder David Tepper said that a taper would not come "for a long time now," and would not begin until next year.


In Depth

An Interview With Harvest Volatility Management's Rick Selvala

Mar 23 2017 | 5:39pm ET

Several years of extremely low interest rates have pushed some investors into equities...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

SEI: Private Debt Coming Into Its Own

Mar 8 2017 | 9:24pm ET

The explosive growth of private debt over the past few years has caused the lines...

 

From the current issue of