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Impact Of The Upcoming Fed Meeting, At A Glance

By The Associated Press

NEW YORK (AP) â¿¿ It's lifted stock prices, lowered borrowing rates, helped revive the economy â¿¿ and it may start winding down soon.

The Federal Reserve meets this week to decide whether to pull back from its extraordinary program of buying bonds designed to stimulate the economy.

Here's a look at the program and why you should care:


It's a two-day meeting starting Tuesday of the Federal Open Market Committee, a 12-member group that decides on central bank policy. The committee will likely decide to slow the central bank's policy of buying $85 billion of bonds each month. That buying has kept long-term borrowing rates at record lows.


The low rates have helped revive the housing market, sent stocks soaring and helped the economy recover from its longest and deepest downturn since the Great Depression. The question now is whether the economy can continue to improve without the Fed's help.


Many economists expect the Fed to slow its bond purchases by $10 billion a month, to $75 billion. The central bank is not expected to change its other key strategy for stimulating the economyâ¿¿ setting a short-term interest rate. It has said it will keep that rate near zero at least until the unemployment rate falls to 6.5 percent. Unemployment is 7.3 percent.


Some experts believe stock and bond markets may largely shrug off a Fed decision to slow bond purchases. Investors have had plenty of time to adjust their holdings. Fed Chairman Ben Bernanke has been suggesting a pullback was coming since May.

Bond investors have been selling in response, pushing down bond prices. The yield on 10-year Treasury notes, which moves in the opposite direction of their price, has nearly doubled to 2.89 percent.

One of the big impacts of a Fed pullback may have already largely taken place: Higher borrowing costs.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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