Members of the Federal Open Market Committee voted Wednesday to continue tapering their bond-buying program, dropping to $25 billion in monthly purchases from $35 billion in June. Information received since the June meeting showed second-quarter growth in economic activity but continued underutilization in the labor market, said a FOMC statement.
FOMC members repeated their belief that the current federal funds rate target of zero to 0.25% will stay low “for a considerable time” after the asset purchase program ends and employment figures improve, the statement said.
“I think the committee wants to ensure that investors don’t pull forward the expected timing of liftoff too aggressively,” said Steven Friedman, director of central banks and official institutions at Fischer Francis Trees & Watts in New York. “The forward guidance hasn’t changed. They keep it in there to keep expectations well anchored.”
Mr. Friedman, a former director of market analysis at the Federal Reserve Bank of New York, said that “strong Q2 GDP bodes well for continued job creation.” That, plus recent comments from Chairwoman Janet Yellen, increases the probability that rates could rise by next June, “and the probability of even earlier is going up,” he said.