Fed Scales Back Stimulus Campaign.

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Source: nyt

The Federal Reserve said on Wednesday that it would reduce its monthly bond-buying campaign to $75 billion in January, beginning a retreat from its stimulus campaign, because it no longer saw the need for the full force of those efforts.

The Fed sought to offset concerns that it was once again pulling back too soon by reinforcing its intent to hold short-term interest rates near zero “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the committee’s 2 percent longer-run goal.”

The steps, announced after a two-day meeting of the Fed’s policy-making committee, represent the beginning of a long-anticipated shift in Fed strategy. Officials say that the bond-buying campaign, which has totaled $85 billion a month until now, has contributed to a modest increase in job creation, but that they are concerned about the Fed’s reliance on a relatively untested form of monetary policy. They would like instead to lean more heavily on “forward guidance” about short-term interest rates, a more familiar policy tool.

“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 committee said in a statement on Wednesday.



Read more: http://www.nytimes.com/2013/12/19/business/economy/fed-scales-back-stimulus-campaign.html?hp

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