US Federal Reserve Chairman Ben Bernanke has announced possibility of cutting back on bond purchases "later this year." Bernanke, speaking at a news conference late on Wenesday, forecast ending the program entirely next year, assuming the US maintains its current economic growth rate.
He also expected unemployment rate to drop from 7.6 percent to seven percent by mid-2014, adding that such progress would end all bond purchases.
"Our purchases are tied to what happens in the economy," the Federal Reserve chief said.
Currently, the Federal Reserve spends USD 85 billion every month for buying bonds. This helps maintain low long-term interest rates, which in turn fuels economic growth.
Stocks took a fall after the announcement as investors worried about rates going up. The Dow Jones Industrial Average dropped 206 points at closing on Wednesday. However the Federal Reserve presented a positive overall economic outlook for the US, suggesting that the current rate of growth no longer requires record-low interest rates.