US Federal Reserve keeps up bond buying but sees less risk to economy
The brighter view of the economy could be a hint that the Fed is moving closer to reducing its bond purchases. But the statement issued after its two-day policy meeting gave no indication of when that might happen.
The Federal Reserve said Wednesday that it will maintain the pace of its bond-buying program to keep long-term interest rates at record lows. But it offered a more optimistic outlook for the U.S. economy and job market.
The brighter view of the economy could be a hint that the Fed is moving closer to reducing its bond purchases. But the statement issued after its two-day policy meeting gave no indication of when that might happen.
Investors reacted initially by selling both stocks and bonds. The Dow Jones industrial average was down 70 points shortly after the statement came out; minutes earlier, it had been down just 16. The yield on the 10-year Treasury note shot up to 2.27 per cent from 2.21 per cent just before the statement came out.
In the statement, the Fed says the economy is growing moderately. And for the first time it said the “downside risks to the outlook” had diminished since fall.
Timothy Duy, a University of Oregon economist who tracks the Fed, calls the statement “an open door for scaling back asset purchases as early as September.”
The fact that the Fed foresees less downside risk to the job market “gives them a reason to pull back” on its bond purchases, Duy says.