|10-29-2014, 08:33 PM||#1|
U.S. Federal Reserve ends bond-buying, keeps `considerable time` guidance
The U.S. Federal Reserve confirmed it will end its third round of quantitative easing program that has added $1.66 billion to the central bank’s balance sheet, and reiterated its commitment to keeping interest rates low for “considerable time.”
The Federal Reserve stressted confidence in the U.S. economic growth despite risks of slowdown in other parts of the world.
The Federal Reserve has now, under Chair Janet Yellen completed two years of asset purchases that started under Ben Bernanke as the U.S. economy nears the central bank’s goal of full employment.
“The Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability,” the central bank’s policy committee said in a statement following a two-day meeting.
The Federal Reserve is now expected to outline a course towards the first increase for interest rates since 2006, while at the same time tackling risks from weakness in the global economy and low inflation.
The Federal Reserve notably dismissed recent volatility in the global financial market and slower growth in Europe and China as reasons to alter the progress of the U.S. economy and its progress towards full employment.
The Federal Open Market Committee reaffirmed it will consider a wide range of data in deciding when to hike interest rates, which have been at a record low of near zero since December 2008.
“Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate,” the Federal Open Market Committee said today in a statement in Washington.
“A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing,” the Committee said, modifying earlier language that “there remains significant underutilization of labor resources.”
The Committee said inflation will probably remain dampened in the near term by lower energy prices, but still repeated words from the previous statement that the possibility of inflation lingering below the 2% target has declined.
Markets were stormed by the Fed’s language, as a more dovish tone has been expected. The U.S. dollar surged against the Euro and all major currencies after being lower for the day. 10-year Treasury yields rose more than 5 basis points.
The Dow Jones Industrial Average, the S&P 500 and the NASDAQ lost more than 0.5% following the Fed’s decision.
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