Members of the Federal Open Market Committee voted to finish tapering their bond-buying program with a final $15 billion in purchases in October. FOMC members found “sufficient underlying strength” in the economy and “cumulative progress toward maximum employment” to warrant tapering, according to a statement issued Wednesday at the end of their two-day meeting.
“The committee will end this program at our next meeting” in late October, Federal Reserve Chairwoman Janet Yellen said at a news conference following the meeting.
FOMC members expected to keep their “highly accommodative” federal funds rate in the zero to 0.25% target range “for a considerable time” after the asset purchase program ends, according to the FOMC statement. Fourteen of 17 FOMC members expect the first increase to happen in 2015, and most of the members expect the rate to return to normal levels by the end of 2017, said Ms. Yellen, who cautioned that economic conditions could change those positions.
Committee members also agreed to provide more information about their plans and approach for normalizing monetary policy when economic conditions and outlooks warrant a less accommodative stance. The change in forward guidance “is in no way meant to imply a change in monetary policy,” Ms. Yellen said. “Conditions could change further, and we will learn about our tools during normalization.”
Once there is a new federal funds rate, the Federal Reserve would begin normalization by adjusting the interest rate it pays on excess reserve balances. It would also use an overnight reverse repurchase agreement facility “and other supplementary tools as needed” to help control the federal funds rate.