* Bernanke's last meeting as chair before Yellen takes reins
* Fed expected to cut bond buying to $65 billion monthly
* Policy decision to be announced at 2 p.m. EST (1900 GMT)
By Ann Saphir and Jonathan Spicer
Jan 29 Turmoil in emerging markets and a month
of disappointing job growth at home are unlikely to deter the
Federal Reserve from trimming its bond-buying stimulus on
Wednesday, as Ben Bernanke wraps up his last policy meeting at
the helm of the U.S. central bank.
Overall signs of improvement in the U.S. economy suggest Fed
officials will stay on track to cut monthly purchases of
Treasuries and mortgage-backed securities by $5 billion each,
bringing the total of their monthly asset purchases to $65
The meeting is Bernanke's last before Vice Chair Janet
Yellen moves into the top spot.
Bernanke took the Fed far into uncharted territory during
his eight years on the job, building a $4 trillion balance sheet
and keeping interest rates near zero for more than five years to
pull the economy from its worst downturn in decades.
With those efforts beginning to pay off - and concerns
growing over possible harm from so much money printing - the Fed
announced plans last month to phase out the bond buying by late
this year unless the economy takes a decided turn for the worse.
It started by trimming its monthly purchases to $75 billion
from $85 billion, and on Wednesday, the U.S. central bank is
expected to shave another $10 billion.
"It's clear the Fed wants to taper," said Eric Stein,
portfolio manager at Eaton Vance in Boston.
Even so, the Fed is nowhere near to making a decision to
raise rates. Policymakers are expected to stick to their promise
to keep rates near zero until well after the U.S. unemployment
rate, now at 6.7 percent, falls to 6.5 percent. The Fed is set
to announce its decision at 2 p.m. EST (1900 GMT).
A dismal employment report for December, which showed
businesses added far fewer jobs than expected, raised some
doubts about the Fed's commitment to keep tapering its stimulus.
But other data in recent weeks, from consumer spending and
confidence to industrial production, was largely upbeat and has
bolstered the view of an improving economy. Forecasters estimate
U.S. GDP grew at an above-trend annual rate of 3.2 percent in
the fourth quarter after notching a 4.1 percent advance in the
prior three months.
The show of strength provides a welcome backdrop for
Bernanke, who steps down on Friday after an unusually tumultuous
and highly experimental stint atop the world's most influential
Steep losses in emerging market assets over the past week
led some to question whether the Fed might put plans to trim its
bond buying on hold, but policymakers have given no indication
that they would be deterred.
A decision by Turkey's central bank to sharply raise its
main interest rates initially helped calm markets overnight, but
the selloff later resumed and U.S. stocks opened lower.
Analysts said the prospect of less Fed stimulus was just one
factor contributing to investor jitters, with signs of slower
growth in China and political turmoil in countries from Turkey
to Thailand playing a bigger role in fueling the emerging market
Unless the selling snowballs into a true crisis, few Fed
watchers think the U.S. central bank will respond.
"It would take a full-blown crisis that ensnares all
(emerging market economies) to have a material effect on the
U.S. economy, and I don't think that's what they see," said
Roberto Perli, a former Fed official who is now a
Washington-based partner at economic research firm Cornerstone
"Clearly emerging market financial markets are in turmoil
for reasons that have little or nothing to do with the Fed
likely tapering again."
That is not to say the decision will be a slam dunk.
Dallas Federal Reserve Bank President Richard Fisher, who is
a voter on the central bank's policy-setting panel this year,
has argued for a more aggressive withdrawal of purchases.
On the other end of the spectrum, Minneapolis Fed President
Narayana Kocherlakota, also a voter, has argued for more, not
less, stimulus, and that view could translate into a dissent.
Still, the Fed puts a high premium on consensus, and
Kocherlakota may feel that presenting a united front on policy
could be a stabilizing force for financial markets, Eaton
Vance's Stein said.
"I don't think it's completely pro forma," he added, "but I
do think the consensus of the committee is to taper, about in
line with the last meeting."