* Reduces monthly bond purchases by $10 billion, as expected
* First unanimous vote on policy since June 2011
* Fed says job market better despite mixed data
* No changes to Fed's interest rate guidance
By Jonathan Spicer and Jason Lange
WASHINGTON, Jan 29 The Federal Reserve on
Wednesday decided to trim its bond purchases by another $10
billion as it stuck to a plan to wind down its extraordinary
economic stimulus despite recent turmoil in emerging markets.
The action was widely expected, although some investors had
speculated that the U.S. central bank might put its plans on
hold given the jitters overseas.
Fed Chairman Ben Bernanke, who hands the Fed's reins to Vice
Chair Janet Yellen on Friday, managed to adjourn his last
policy-setting meeting without any dissents from his colleagues.
It was the first meeting without a dissent since June 2011 - a
sign of how tumultuous Bernanke's tenure has been.
In addition to proceeding with plans to scale back its bond
buying, the Fed made no changes to its other main policy plank:
its pledge to keep interest rates low for some time to come.
The decision suggests that it would take a serious threat to
the U.S. economy before the Fed backs down from a resolve to
shelve the asset-purchase program later this year.
Indeed, it offered a somewhat rosier assessment of the U.S.
economy's prospects than it did last month, saying "economic
activity picked up in recent quarters." It also largely shook
off surprisingly soft jobs growth in December. "Labor market
indicators were mixed but on balance showed further
improvement," it said.
"They really want to move to the sidelines here and get out
of the (bond buying) business," said Jack Ablin, chief
investment officer at BMO Private Bank in Chicago.
Major U.S. stock indexes closed down more than 1 percent,
while yields on the benchmark 10-year Treasury note hit the
lowest level since late October. The dollar rose against the
euro, but was little changed against a broad basket of
ENDING THE PURCHASES
Importantly, the Fed stuck to its promise to keep rates near
zero until well after the U.S. unemployment rate, now at 6.7
percent, falls below 6.5 percent, especially if inflation
remains below a 2 percent target. Some analysts had speculated
it might alter this guidance, given how close the jobless rate
now is to the rate-hike threshold.
In fact, the central bank's statement largely mirrored the
one it issued after its Dec. 17-18 meeting, when it announced an
initial $10 billion cut to its monthly bond purchases.
At the time, Bernanke told reporters the Fed would likely
continue to taper the purchases in "measured" steps through the
year until it was fully wound down, as long as the economy
continued to heal. He did not speak to the media on Wednesday.
In its statement on Wednesday, the Fed said it would buy $65
billion in bonds per month starting in February, down from $75
billion now. It shaved its purchases of U.S. Treasuries and
mortgage bonds equally.
"The Fed's action today represents a continuation of its
resolute determination to end (bond purchases) during 2014,"
said Daniel Alpert, managing partner at Westwood Capital in New
York. "The policy has hit its 'sell by' date."
FOCUSED ON HOME
In announcing its decision, the Fed made no reference to the
sell-off in emerging markets that has depressed U.S. stocks in
Markets in countries with large current account deficits,
such as Turkey and Argentina, have suffered steep losses in part
because of the prospect of less U.S. monetary stimulus.
These currencies and stocks slumped again after the Fed's
announcement, offsetting aggressive interest rate hikes by
Turkey and South Africa.
Meanwhile, economic signals in the United States - from
consumer spending to industrial production and trade - have
suggested the U.S. recovery closed out last year on solid
ground, reinforcing expectations the Fed would continue trimming
stimulus. The weak December jobs report has been viewed as an
The central bank launched its current round of bond
purchases in September 2012, its third such effort since the
darkest days of the financial crisis in late 2008.
The effort to bring the purchases to a halt will now fall to
Yellen, who has strongly backed the unprecedented actions the
Fed has taken to boost growth and get more Americans back to
work. She will chair her first policy meeting on March 18-19.
Bernanke, a professor and leading scholar of the Great
Depression before joining the Fed, took the central bank 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.