Fed Bond Purchases to Slow Down Later This Year
The FOMC minutes showed that there was a lack of consensus as to when exactly bond purchases should slow down and when they should cease. Although Bernanke stressed at last month’s conference that the Fed would step up its bond purchases again in the event of the economy weakening, investors were alarmed, stocks and bond fell and interest rates climbed. Following the release of the minutes of the meeting, Bernanke emphasized that easing off on bond buying will not affect the Federal Reserve’s commitment to promote economic expansion while reducing unemployment. Since the bond purchases started in September, an average of 204,000 jobs per month has been added – a marked improvement over the 174,000 jobs per month in the first nine months of 2012. Nonetheless, unemployment remains at 7.6%. The Fed has made it known that it plans to keep short-term interest rates close to zero until unemployment drops below 6.5 percent, and even in that event, will review the situation before raising them.