Arab Today, arab today bernanke fed may begin cutting qe later this year
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Arab Today, arab today
Arab Today, arab today

Bernanke: Fed may begin cutting QE later this year

Arab Today, arab today

Arab Today, arab today Bernanke: Fed may begin cutting QE later this year

Washington - AFP

The Federal Reserve on Wednesday kept its stimulus program for the US economy locked in place, saying that unemployment remains high and growth is still being held back by government spending cuts. But Fed Chairman Ben Bernanke said that if growth continues to pick up pace the Fed could begin reeling in its $85 billion-a-month in bond purchases sometime later this year, and bring the operation to a close by mid-year 2014. Stressing that \"our purchases are tied to what happens in the economy,\" Bernanke said that most of the members of the Federal Open Market Committee foresaw tapering the key stimulus program in the coming months. \"The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year,\" he told reporters after the FOMC meeting ended. In addition, he said, if the FOMC\'s current forecasts for the economy are met, \"we will continue to reduce the pace of purchases in measured steps through the first half of next year ending purchases around mid-year.\" Bernanke\'s comments confirmed market expectations that the Fed sees growth tentatively firm enough to begin pulling back the quantitative-easing (QE) program, which aims at holding longer-term interest rates down. US bond prices had plunged and interest rates pushed higher over the past month in expectation that the Fed would soon begin a turn away from five years of efforts to boost US growth since the economic crisis erupted in 2008. The FOMC said in its policy statement the economy continues to grow at a \"moderate\" pace and that downside risks had eased, but it added that tightened fiscal policy \"is restraining economic growth.\" \"Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,\" the FOMC said pointedly, indicating its ongoing dissatisfaction with the pace of job creation. The Fed policy board eased its growth forecast for the US economy this year slightly to 2.3-2.6 percent, while raising it for 2014 to 3.0-3.5 percent. But, the forecasts show, the Fed clearly sees improvement ahead in the economy despite sharp government spending cuts. It expects the jobless rate will fall faster than it predicted just three months ago, to as low as 7.2 percent by the end of the year from the current 7.6 percent, and to as low as 6.5 percent by the end of 2014. At the same time, it sees inflation as even weaker that it did in March, and posing little threat despite the continuation of its easy-money QE policy and its ultra-low benchmark interest rate, at 0-0.25 percent since December 2008. Bernanke stressed that slowing the QE asset purchases was not the same as tightening monetary policy -- it was like \"letting up a bit on the gas pedal as the car picks up speed, not beginning to apply the brakes,\" he said. The economy still remains far from the Fed\'s thresholds of a 2.0 percent inflation rate and 6.5 percent unemployment rate before it would begin increasing its interest rate to a more normal level, he said. That \"is still far in the future,\' he said.

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