U.S. Fed cuts QE by $10 Billion...and Dow Index spiked up 158 points

December 18, 2013

Washington (Dec 18)   In a surprise move the FOMC voted to cut $10 billion a month from its $85 billion bond-buying program, starting in January. Yet the central bank also indicated it will keep the key fed funds interest rate near zero "well past the time that the unemployment rate declines below 6.5%. The reduction will be split between mortgage-back securities and Treasurys. The Fed will trim mortgage purchase by $5 billion to $35 billion a month and Treasurys by $5 billion to $40 billion a month. The Fed vote was 9 to 1, with Boston Federal Reserve chief Eric Rosengren dissenting. He called the move "premature.

Almost immediatedly, Wall Street stock prices surged upward in the assumption the US economy is indeed improving, which will fuel stock prices going forward.

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