"If incoming data broadly support the committee's support for employment we will likely reduce the pace of committee's purchases in further steps at future meetings."
- Ben S. Bernanke, Fed Chairman
Finally this day has come– it is the last Federal Reserve's Open Market Committee before 2014. For weeks financial markets have been waiting for the decision as to whether the Federal Reserve will start reducing the pace of monthly bond purchases or not. While analysts are still making their bets and trying to predict market's future movements, the U.S. housing starts soared to their highest level in almost six year last month, bolstering the case the housing market is strong enough to withstand the tapering.
The Fed announced its intention to start trimming its extraordinary monthly stimulus efforts by $10 billion a month from $85 billion to $75 billion, taking the first step to remove the incentives, which were designed to lower interest rates and boost economic activity to help the nation's economy recover from the worst recession since the 1930s. The central bank referred to a stronger job growth as a reason to begin unwinding its programme of bond buying, and it said that the employment situation will improve faster than expected, with jobless rate falling from the current 7% to 6.3% in 2014. This could be a trigger for further reduction in the Fed's stimulus efforts in the coming year. The Fed will cut its U.S. Treasury purchases from $45 billion to $40 billion a month, as well as the bank will reduce its buying of mortgage-backed securities from $40 billion to $30 billion per month. As a result, the U.S. Dollar rose versus most of 16 major counterparts.
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