19 Dec 2013

Fed to slow monthly bond buying programme

12:20 pm on 19 December 2013

The US Federal Reserve is to slow its efforts to boost the US economy.

Federal Reserve chairman Ben Bernanke.

Federal Reserve chairman Ben Bernanke. Photo: AFP

The Fed said on Wednesday it planned to reduce its monthly bond buying programme of $US85 billion, which is designed to lower interest rates and stimulate economic activity, by $US10 billion.

The BBC reports the announcement followed a two-day meeting in Washington, DC, and is a sign that the Fed thinks the US economy has consolidated its recovery, five years after the financial crisis.

In its forecast for the coming years, the Fed said the employment situation will improve faster than previously expected.

It said the unemployment rate will fall to 6.3% in 2014 from its current level of 7%.

This could set the pace for further reductions in the Fed's stimulus efforts in the coming year.

"If incoming data proudly support the committee's support for employment we will likely reduce the pace of committee's purchases in further steps at future meetings," said chairman Ben Bernanke.

However, the BBC reports he also cautioned:

"Continued progress is by no means certain. Adjustments will be deliberate and dependent on incoming information."

Commentators say the decision is aimed at forestalling any sharp market reaction that could undercut the recovery.