Members of the Federal Open Market Committee meeting Wednesday decided unanimously to continue slowing the Fed's bond-buying program known as quantitative easing in February, dropping monthly purchases to $65 billion from $75 billion in January.
That amount represents a further drop from $85 billion in monthly purchases throughout 2013.
Beginning in February, the Federal Reserve will buy $30 billion per month of agency mortgage-backed securities and $35 billion per month in longer-term Treasury securities. “The committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates” and support economic recovery, the members said in a statement issued at the conclusion of a two-day meeting.
“I think the market expects them to wind down tapering all the way through the year,” said James Balfour, vice president and senior global economist at Loomis, Sayles & Co.
FOMC members said they will keep the federal funds target rate of zero to 0.25% “for a considerable time” after the asset purchase program ends and the economy gets stronger. Committee members said they would consider other factors, such as labor market conditions and inflation indicators, in deciding how long to keep that rate low, but anticipate that it likely will be appropriate “well past” the unemployment rate dropping below 6.5%.
“I think they've convinced the market that they're not going to hike for a long time,” Mr. Balfour said.