The Federal Reserve said on Wednesday that it would begin to taper its bond-buying program beginning in January, reducing its asset purchases by $10 billion per month.
In January, the Fed will increase its holdings of mortgage-backed securities by $35 billion—compared to $40 billion—per month, and it will purchase longer-term Treasury securities at $40 billion per month, compared to $45 billion.
“The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate,” the Fed said.
The Fed reaffirmed its view that a “highly accommodative stance of monetary policy” will remain in place after the asset purchase program ends and until the economy is stronger.
“The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability,” the Fed said. “If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.”