Fed Tapers, Most Members See Rate Hike In 2015

Washington (June 18)   The Federal Open Market Committee  on Wednesday reduced the pace of monthly asset purchases by  USD10 billion  to  USD35 billion  , as expected.

The central bank will add to its holdings of agency mortgage-backed securities at a pace of  USD15 billion  per month, and will add to its holdings of longer-term Treasury securities at a pace of  USD20 billion  per month.

Additional tapering is likely if the labor market continues to show improvement and inflation picks up, the Fed said in a statement accompanying its decision.

With the economy rebounding after a rough patch during the winter, the Fed is now on pace to halt bond buying altogether within the next few months.

Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow.

However, policymakers remain concerned that inflation is running persistently below its 2% objective. In accordance with its mandate to promote price stability, the Fed said it will keep its benchmark interest rate near zero "for a considerable time after the asset purchase program ends."

Only one of 16 officials thinks rates should rise this year, while 12 think 2015 will be appropriate.

The Fed also released new quarterly forecasts for unemployment, inflation and economic growth.

Source:  Alliance News