Reduced Fed support reflected in January bond-buying plan

NEW YORK Mon Dec 30, 2013 3:38pm EST

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

NEW YORK (Reuters) - The Federal Reserve plans to purchase about $40 billion in longer-dated federal government debt in 18 operations next month, the New York Fed said on Monday, reflecting the U.S. central bank's decision to trim its support for the economy.

In what came as a surprise to some investors, earlier this month the Fed decided to cut its bond-buying program, known as quantitative easing, by $10 billion to $75 billion per month. It reduced purchases of both Treasuries and mortgage bonds by $5 billion each.

The Fed cited a stronger job market and economic growth in its landmark decision, which amounts to the beginning of the end of the largest monetary policy experiment ever.

The New York Fed, which carries out monetary policy in financial markets, will pare purchases broadly across a spectrum of securities maturing between 2018 and 2043, according to the plan. For the detailed schedule, see here

To recover from the recession, the central bank has held interest rates near zero since late 2008 to spur growth and hiring. It also has quadrupled the size of its balance sheet to around $4 trillion through three rounds of massive bond purchases aimed at holding down longer-term borrowing costs.

Fed Chairman Ben Bernanke, who is scheduled to step down on January 31, told reporters after the December 18 decision that this gradual rate of reductions would likely be maintained over the course of 2014.

Nearly all economists polled by Reuters now expect the Fed to continue to pare its bond-buying throughout 2014, until it is completely wound down before the start of 2015.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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Comments (2)
Newsrocket wrote:
Like the bloody Roman doctors, bleeding their poor patients until they miraculously get well. We need a heck of a lot more than quantitative easing. We need to learn from history, as with the Reconstruction Finance Corporation in the 30s that you can’t starve an economy to health. We must stimulate it with money we can print because we’re a sovereign nation. Unemployment, UNDERemployment and increasing poverty while the rich become obscenely so, is a strategy for, of and by the rich, not for, of and by the people. Oligarchy has one way to go. And that’s down…and down it will go…sooner than all their smug smiley little faces think.

Dec 30, 2013 7:25pm EST  --  Report as abuse
Newsrocket wrote:
Selling treasuries to the already obscenely rich does not stimulate the economy. It just swells the bank accounts of the already wealthy. Put the money to work as we saw in the 1930s with the Reconstruction Finance Corporation that built dams, schools, highways, airports, ports universities, irrigation systems, canals and other infrastructure that unwittingly prepared us to fight a world war on two fronts. The U.S., and verily, the EU banking system, built on debt rather than wealth, cannot and will not stand. It works for the very few at the top – but not for anyone in the bottom 95%. It is a failed vision of how things should work. We need public banking that offers affordable progress – not increasing debt that fosters increasing poverty.

Dec 30, 2013 7:32pm EST  --  Report as abuse
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