Taper Will Be Measured, Data Dependent, Bernanke Says
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.
-- Written by Shanthi Bharatwaj in New York. Follow @shavenk
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