"The vast, highly unprecedented, highly accommodative monetary policy stance that's been so supportive of the recovery has begun to turn. The markets for the next several years or more will have to deal with the withdrawal of that support."
-Michael Gapen, Senior U.S. Economist at Barclays Plc.
The Federal Reserve decided to keep the pace of the asset purchase scheme at $85 billion a month, but is ready to begin winding down its unprecedented easing programme later this year. According to the Fed Chairman Ben Bernanke, the QE tapering might begin at the end of 2013 and will be completely halted by the middle of the next year, if the world's largest economy continue to perform in line with the central bank's expectations, Bernanke said after a two-day meeting of the FOMC. The Fed anticipates the joblessness rate to continue to decline and inflation to move closer to the long-term target of 2%.
Moreover, the Fed maintained interest rates at a record low range of between zero and 0.25%, and it may take several years before the central bank will consider raising them. The Fed's forecasts indicated that most policy makers do not expect to begin increasing the benchmark lending rate until 2015.
The Chairman's hint of the end of QE indicates that the central bankers see the nation's economy finally healing from the credit crunch that pushed down housing prices by 35% over six years, left one in ten workers jobless in 2009 and prompted the most substantial overhaul of financial regulation since 1930s.
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