U.S. Federal Reserve cuts bond-buying program to $75B a month

Nathan Andrada – Fourth Estate Cooperative Contributor

Washington, DC, United States (4E) – The U.S. Federal Reserve is pulling back its monthly bond-buying program to $75bn from $85bn, the initial step in unwinding the easy-money policy that Chairman Ben Bernanke launched to boost the economy.

The Fed has scaled back its stimulus measures before, but it put them back in place when the economy was slowing down, and new challenges emerge, such as weakening inflation. Mr. Bernanke, however, said in a news conference – his last as Fed chairman — that the economy has reached a level where it needs less monetary stimulus.

The outgoing Fed chairman said the central bank’s purchases will be divided between $40bn in Treasuries and $35bn in mortgage bonds beginning next month. The Fed plans to lower its monthly amount of its purchases by increments of $10bn at next policy meetings.

If the Fed’s plan proceeds at the rate it expects, the bond-buying program will be completed by the end of 2014 with holdings of almost $4.5bn in bonds, loans and other assets. The figure is almost six times the size of the Fed’s total holdings when the downturn began in 2008.

Janet Yellen, President Barack Obama’s nominee to succeed Mr. Bernanke and current Fed vice chairman, voted in favor of today’s policy action.

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