ECONOMY - The FED Scales Back Buying Treasury Bonds

"Federal Reserve announces pull back on stimulus as Bernanke nears end of tenure" PBS Newshour 12/18/2013

Excerpt

JUDY WOODRUFF (Newshour):  The Federal Reserve has been warning for months that it would shift and reduce the size of its role in spurring the economy.  But right up to this afternoon's announcement, many were still wondering when the Fed would dial back and how it would do so.

Ben Bernanke came to his last scheduled news conference as Fed chairman as the Central Bank announced it will start scaling back its long-running stimulus program.

BEN BERNANKE, Federal Reserve Chairman:  Today's policy action reflects the committee's assessment that the economy continues to make progress, but that it also has much farther to travel until conditions can be judged normal.

JUDY WOODRUFF:  The Fed has been buying $85 billion in Treasury bonds every month to hold down interest rates and boost economic growth.  Starting next month, that amount will be reduced by $10 billion a month.

At the same time, a benchmark short-term interest rate will stay near zero.  The Fed says that policy will hold well past the point when the unemployment rate falls below 6.5 percent.  It's now at 7 percent.

BEN BERNANKE:  The job market has continued to improve, with the unemployment rate having declined further.  At the same time, the recovery clearly rings far from complete, with unemployment still elevated and with both underemployment and long-term unemployment still major concerns.

JUDY WOODRUFF:  For Bernanke, the announcement is a climax to an eight-year tenure that's been marked by big moments in U.S. financial history.