Fed ends bond buying on signs of US recovery

THE FEDERAL Reserve yesterday ended its monthly bond-purchase programme and signalled confidence the US economic recovery would remain on track despite signs of a slowdown in many parts of the global economy. “The committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability,” the central bank’s policy committee said in a statement following a two-day meeting. The statement largely dismissed recent financial market volatility, dimming growth in Europe and a weak inflation outlook as headwinds that would do little to undercut progress towards the Fed’s unemployment and inflation goals. The Fed pointed to strengthening labour markets, saying that slack in labour markets was “gradually diminishing”. It retained its basic language regarding interest rates from recent statements, saying that rates would remain low for a “considerable time” following the end of the bond purchases this month. The timing and pace of rate hikes would depend on incoming economic data, the Fed said, [the] new language that apparently earned the support of Philadelphia Fed president Charles Plosser and Dallas Fed president Richard Fisher, who dissented at the previous meeting. On inflation, the Fed acknowledged that lower energy prices and other forces were holding inflation down, but that overall the economy should progress towards the central bank’s 2 percent target. “The committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year,” the statement said. – Reuters