The US Federal Reserve announced on Wednesday it will be reducing its bond-buying once again from USD 75 billion down to USD 65 billion, in light of increased "growth in economic activity" over the past month.
In December, purchases had been rolled back by USD 10 billion from USD 85 billion. The Fed acquires the bonds in order to foster economic growth and keep interest rates low.
In a statement following its two-day meeting, the Fed noted, "Labor market indicators were mixed but on balance showed further improvement," and "the unemployment rate declined but remains elevated." As for Treasury bonds, the statement declared, "Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of USD 30 billion per month rather than USD 35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of USD 35 billion per month rather than USD 40 billion per month." "The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of zero to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent," it continued. The short term interest rate has in fact been at zero since the 2008 financial crisis, and the Fed said it will maintain that figure even if unemployment numbers continue to fall.
Figures from December show the U.S. unemployment rate as having dropped down to 6.7 percent from 7.0 percent.
News of the stimulus trim comes as Chairman Ben Bernanke prepares to step down next week, when he will be replaced by the first woman to lead the bank, Janet Yellen.