Fed plans further cuts in bond-buying as Yellen holds 1st presser

Kevin G. Hall

The Federal Reserve announced Wednesday further cutbacks to its controversial bond-buying program designed to stimulate the economy.

At the close of a two-day meeting, the Fed said in a statement that beginning in April, it will cut by another $10 billion a month its purchase of government and mortgage bonds, and is on a pace to end the program late this year or early in 2015.

Throughout 2013, the Fed purchased $85 billion a month of bonds in a bid to drive down long-term borrowing costs in the economy, especially for home buyers, and force investors out of safe havens and into riskier assets such as stocks and commodities.

With the economic recovery appearing to shift into higher gear, the Fed began tapering back its monthly purchases, reducing them by $10 billion in January and another $10 billion in February. New Federal Reserve Chairwoman Janet Yellen had been expected to announce similarly sized reduction Wednesday, which would now slow the Fed’s purchases to a pace of $55 billion a month.

Big developing economies such as Brazil have complained that the tapering has been disruptive because investors are fleeing those nations for safer, albeit it less lucrative bets in the United States. Critics of the Fed effort complain it is akin to printing money and could eventually spark inflation, although there is little sign of looming inflation anywhere right now.

By Kevin G. Hall
McClatchy Washington Bureau