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NEW YORK (
Citigroup(C - Get Report) was the winner among stocks of large U.S banks on Wednesday, with shares rising over 2% to close at $52.25.
The broad indices quickly reversed early losses and ended with 1% gains, after the Federal Open Market Committee released its statement at 2:00 p.m. ET, saying the Federal Reserve would not taper its monthly bond purchases until at least the next FOMC meeting on Oct. 29-30. The Committee "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," according to the statement.
The committee also said "these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate" of working to reduce unemployment and foster economic growth while keeping inflation in check.
Most economists had expected the Fed at least to make a slight reduction in its "QE3" balance sheet expansion. The central bank has been making monthly net purchases of $40 billion in long-term mortgage-backed securities and $45 billion in long-term U.S. Treasury bonds since last September. But the attempt to hold-down long-term rates for the most part has stopped working, as investors have been anticipating a reduction in bond purchases for quite some time, sending the yield on 10-year Treasury bonds up 100 basis points since the end of April. Mortgage refinance applications and total mortgage volume have been reduced considerably as a result.
The FOMC also released revised economic projections, lowering their estimate of 2013 GDP growth to a range of 2.0% to 2.3% from the previous range of 2.3% to 2.6%. For 2014, the committee estimates GDP growth of 2.9%, down from its previous estimate of 3.1%.
Federal Reserve Chairman Ben Bernanke during a press conference following the release of the FOMC statement said "We could move later this year," to reduce Federal Reserve bond purchases, but added that "subsequent steps will be data dependent."