This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Divided Fed Wrestles With When To Slow Bond Buys

By MARTIN CRUTSINGER

WASHINGTON (AP) â¿¿ The Federal Reserve is torn over when to slow its aggressive efforts to stimulate the economy.

Its uncertainty burst into view Wednesday, when Chairman Ben Bernanke testified to Congress in the morning and the Fed in the afternoon released the minutes of its last policy meeting.

Stock prices gyrated through the day as investors struggled to determine whether the Fed might soon pull back â¿¿ even gradually â¿¿ on its extraordinary efforts.

At one point, the Dow Jones industrial average had jumped more than 150 points after Bernanke's testimony signaled his belief that it was too soon for the Fed to pull back on its support for the economy, including its $85 billion a month in Treasury and mortgage bond purchases.

But the Dow plunged and closed down 80 points after minutes from the Fed's April 30-May 1 meeting showed that several members favored cutting the level of purchases, perhaps as early as June. Even that was hard to decipher because the minutes said members would have to agree that the economy had shown strong and sustained growth before the Fed would slow its bond purchases.

The Fed is buying the bonds to try to ease long-term borrowing costs, encourage borrowing and accelerate growth. And it's said it will maintain its pace of bond purchases until the job market improves substantially.

Economists don't expect the Fed to curtail the bond purchases next month. But Paul Ashworth, chief U.S. economist for Capital Economics, said the September meeting is a real possibility.

For one thing, Bernanke told lawmakers Wednesday that the Fed might reduce the purchases within the next few meetings if the job market showed "real and sustainable progress." Bernanke is scheduled to hold a news conference after the September meeting, so Ashworth said it would allow him to directly explain the change then.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs