Goshen News, Goshen, IN

Business

January 30, 2014

Federal Reserve slows bond buying pace

WASHINGTON — The Federal Reserve is pushing ahead with a plan to shrink its bond-buying program because of a strengthening U.S. economy. It’s doing so even though the prospect of reduced Fed stimulus and higher U.S. interest rates has rattled global markets.

The Fed said it will cut its monthly bond purchases starting in February by an additional $10 billion to $65 billion. It also reaffirmed its plan to keep short-term rates at record lows in a statement it issued Wednesday after Ben Bernanke’s final policy meeting. Bernanke will step down Friday after eight years as chairman.

Many global investors fear that reduced Fed bond buying will boost U.S. rates and cause investors to move money out of emerging markets and into the United States for higher returns. Currency values in emerging nations have fallen. India, Turkey and South Africa have raised rates to try to protect their currencies.

Most economists expect a string of $10 billion monthly reductions in bond purchases to be announced at each Fed meeting this year, concluding with a final $15 billion cut in December.

The bond purchases have been intended to keep long-term borrowing rates low to spur spending and growth. The Fed’s decision Wednesday to continue paring its purchases signals its belief that the economy is showing consistent improvement. In its statement, it upgraded it assessment to say “growth in economic activity picked up in recent quarters.”

Stocks fell after the Fed announced its decision. Bond prices rose slightly, and their yields dipped.

The Dow Jones industrial average was down 185 points about an hour after the Fed’s announcement at 2 p.m. Eastern time. It had been down 127 points just before as disappointing earnings from big U.S. companies contributed to a sour mood on Wall Street.

The yield on the 10-year Treasury note slipped to 2.68 percent.

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Poll

Goshen City Council member Dixie Robinson is asking residents to make an effort to clean up their yards this spring. The city’s Dial-A-Truck program is available to haul trash away. Do you think there are more unsightly properties in Goshen this year than five years ago?

Yes. I have noticed more problem properties
No. I have not noticed more problems
I think the problems are about the same as always
     View Results