The Federal Reserve on Wednesday voted 8-1 to reduce its bond-buying stimulus program for the third straight meeting, to $55 billion a month from $65 billion starting in April. The central bank also shifted its so-called forward guidance on how long it plans to keep short-term interest rates at zero. The Fed said it will now consider a "wide range" of factors instead of relying mainly on the unemployment rate. The Fed statement also stressed that the bank could keep short-term rates below what is viewed as "normal" even if employment levels and inflation hit its targets. The bank wants investors to know it will keep rates low for quite some time and has no plans to quickly raise them. Most Fed officials - 13 of 16 - don't expect the first rate hike until 2015, with rates rising somewhat faster in 2016. Minneapolis Fed chief Narayana Kocherlakota dissented. In its latest economic forecast, the Fed also trimmed its estimate of U.S. growth in 2014 and predicted unemployment would fall quicker than it previously expected. The bank now sees the U.S. growing no faster than 3.0% this year instead of 3.2% under its December forecast. U.S. unemployment is projected to fall to 6.1% to 6.3% by the end of 2014 vs. the prior estimate of 6.3% to 6.6%. The jobless rate now stands at 6.7%. The Fed's forecast on inflation was little changed.
Source: Marketwatch
Source: Marketwatch
