Home > Economics, Finance > Federal Reserve Announces Modest Taper of $10 Billion

Federal Reserve Announces Modest Taper of $10 Billion

Wednesday, December 18th, 2013 Leave a comment Go to comments

Everyone was waiting today to see if Ben Bernanke would announce a taper of the the Fed’s bond buying program at his final planned news conference before retiring. Well, Big Ben did not disappoint!

From MarketWatch:

The Federal Reserve on Wednesday took the first step to exiting its controversial bond-buying program, showing greater confidence that the U.S. economy will grow faster and hiring will pick up over the next year.

Starting in January, the Fed will reduce the pace of asset purchases to $75 billion from $85 billion a month. And if the economy improves at the pace the Fed expects, outgoing Chairman Ben Bernanke said in a press conference that he could foresee the bond-purchase program coming to an end by late next year.

 

In addition to the Fed announcing a modest taper, the Fed also provided other bullish comments:

[T]he central bank also tried to cushion the effects of a reduction in bond purchases on U.S. markets by indicating that short-term interest rates could remain near zero for even longer than the Fed had previously suggested, perhaps for several years.

 

So how did financial markets react towards the news? Quite positive to say the least. Here is a market recap:

Dow Jones Industrial Average DJIA +1.84%  soared to close near its all-time high with the best point gain since October 10. Dow added 293 points, or 1.8%, to 16,167.97. The S&P 500 index SPX +1.67%  rose 30 points, or 1.7% to 1,810.65, within a hair’s breadth of its all-time high. Nasdaq Composite COMP +1.15%  was up 16 points or 1.1% to 4,070.66.

 

Click the following link to read the full text of the Fed’s statement.

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