This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Taper Will Be Measured, Data Dependent, Bernanke Says

Stocks in this article: ^DJI ^GSPC

NEW YORK (TheStreet) -- The Federal Reserve at long last announced Wednesday that it would begin tapering bond purchases, citing "cumulative progress" in the labor market.

The central bank now plans to trim bond purchases by $10 billion to $75 billion a month beginning in January. It will purchase agency mortgage-backed securities at a pace of $35 billion a month, as opposed to $40 billion and will buy Treasuries at a pace of $40 billion rather than $45 billion.

The Fed also said it would keep interest rates low "well past" the time unemployment rate hits 6.5%, especially if inflation remains below the central bank's target of 2%.

Stocks initially were volatile following the Fed's announcement, but were last trading strongly higher. The Dow Jones Industrial Average was up 1.5%. Bonds declined moderately. The 10-Year note was down 10/32, with the yield rising to 2.878%.

Speaking at his final press conference, outgoing Chairman Ben Bernanke emphasized that the central bank was "tapering" not tightening. The central bank was continuing to add to its portfolio.

He also cautioned that the employment rate of 6.5% was a threshold not a trigger. While Fed officials expect unemployment rate to fall to 6.5% by the end of 2014, they will look at a range of measures including hirings, quits, labor force participation rate, wages and so on in determining whether the employment market was strong enough to allow for a tightening in monetary policy.

Bernanke said the Fed plans to do similar measured reductions at each meeting through the end of 2014, but again cautioned that any taper would be "data dependent".

The Fed is particularly worried about inflation being too low and would take "appropriate action" if it fails to meet the target 2%.

Janet Yellen is expected to be confirmed as the new Chairwoman of the Fed this week. Asked if she was on board with the latest decision, Bernanke said he always closely consulted with her on monetary policy and that she supported the taper.

In response to a question about how he would be judged by monetary policy historians in the future, Bernanke said ""I hope I live long enough to read the textbooks."

He said the Federal Reserve "rediscovered its roots" during his tenure, stabilizing the system in times of panic. His time at the Fed will also be known as one of the first examples of aggressive monetary policy action amid near-zero interest rates, he said.

Still, he added that monetary policy was not a panacea. The fiscal drag from Congress' failure to resolve budget issues earlier this year weighed on the economy despite the Fed's efforts.

However, he welcomed the latest budget deal that is expected to clear this week.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs