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[video] Federal Reserve Announces Reduced Economic Stimulus

The video this transcript is based on appeared on December 18.

NEW YORK (TheStreet) -- The Federal Reserve moved to reduce its economic stimulus program after determining the U.S. economy is growing at a strong enough clip.

VIDEO TRANSCRIPT:

Joe Deaux:
The Federal Reserve made its huge decision and said it will scale back its quantitative easing by 10 billion dollars a month, five billion in treasuries, five billion in mortgage-backed securities. Here to talk about what that means is Ben Garber, he's an economist at Moody's Analytics. Ben, thanks so much being for here.

Ben Garber:
Thanks for having me.

Joe Deaux:
So, what's your take?

Ben Garber:
Look, the Fed saw strong data in jobs, a pickup in growth and they said now is the time to start unwinding this extraordinary stimulus, still keeping interest rates low in the long term but it's time to roll back this asset purchases.

Joe Deaux:
So what does this mean moving forward, more tapering each month?

Ben Garber:
I think they will take a steady pace of tapering at each meeting, provided that the economic data holds up and inflation, which is still low, moves back up to the 2 percent target.

Joe Deaux:
Were you surprised by the decision?

Ben Garber:
Not really, it was a very close call, it have gone either way but I think that, you know, they had set up the market for such an action, was not that much of a surprise and, you know, I think they're going to focus more
on put in their forward guidance for exceptional rates and let that take care for the heavy lifting for monetary policy .

Joe Deaux:
Sure. What about the decision to scale back on mortgage-backed securities, I know you and a lot of other people saying maybe they'll just stick to treasuries if they do taper.

Ben Garber:
Yeah, I mean even in the statement they remarked on how housing had slowed a bit in recent months but at the same time because refinance activity dropped off so much, there'd be less mortgage-backed securities to buy over the next year or so so perhaps it make sense to scale back on mortgages as well.

Joe Deaux:
We've seen so much good economic data we actually have a Fed taper, it almost sounds like a market returning to some sort of fundamentals.

Ben Garber:
Yeah I think we could see growth moving forward at a fast pace without the weight of extreme fiscal tightening. Perhaps homebuilding becomes a catalyst for growth towards 3 percent next year, so we're definitely seeing a move toward a normalized economy.

Joe Deaux:
All right, Ben Garber, thanks so much.

Ben Garber:
Thank you.

Joe Deaux:
For TheStreet, I'm Joe Deaux.

Written by Joe Deaux in New York.

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