Fed again cuts bond purchases

Published 12:00 am Thursday, January 30, 2014

WASHINGTON — The Federal Reserve announced Wednesday another $10 billion cut in its monthly bond purchases in a statement that attributed the decision to “growing underlying strength in the broader economy.”

The statement, published after a two-day meeting of the Fed’s policymaking committee, reflected the optimism of Fed officials that the economy is finally poised for faster growth after years of false starts and setbacks.

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It was the committee’s first unanimous decision since 2011.

The Fed said it would expand its holdings of Treasury and mortgage-backed securities by $65 billion in February, down from $75 billion in January and $85 billion each month last year. It added that it was “likely” to continue the pullback, suggesting a similar cut is likely at its next meeting in March.

The Fed did not change its forward guidance that it intends to keep benchmark short-term interest rates near zero “well past the time” that the unemployment rate falls below 6.5 percent. The rate stood at 6.7 percent in December.

The statement said that growth “picked up in recent quarters,” indicating the Fed’s optimism about the strength of the economy was not shaken by a recent run of lackluster economic data, including the December jobs report.

The statement also made no mention of the recent turmoil in emerging markets.

The Fed’s pullback is contributing to a global shift in investments as people who chased higher returns in foreign markets look forward to the return of higher interest rates in the United States. That is causing problems in countries like Turkey that depend heavily on foreign investment.

This was the last Fed meeting led by Ben S. Bernanke, who will step down as Fed chairman Friday after leading the central bank for eight years.

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