The Free Press, Mankato, MN

Business

June 19, 2013

Fed suggests it's closer to slowing bond purchases

(Continued)

The ultra-low rates engineered by the Fed have helped fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth America lost to the recession.

Financial markets have been gyrating in the four weeks since Chairman Ben Bernanke told Congress the Fed might scale back its effort to keep long-term rates at record lows within "the next few meetings"— earlier than many had assumed.

Bernanke cautioned that the Fed would slow its support only if it felt confident the job market would show sustained improvement. And he also told lawmakers that the Fed must take care not to prematurely reduce its stimulus for the still-subpar economy.

The Fed announced after its September meeting that it would purchase $40 billion a month in mortgage bonds for as long as it deems necessary. And in December, the Fed expanded the program to $85 billion a month, adding $45 billion a month in Treasury bond purchases. The Treasury purchases replaced an expiring bond-purchase program.

Job growth picked up after the Fed announced the latest round of bond purchases. Since October, the economy has added an average of 196,500 jobs a month, up from 157,000 a month in the previous eight months.

Last month, the U.S. economy added a solid 175,000 jobs. But the unemployment rate is still high at 7.6 percent. Economists tend to regard the job market as healthy when unemployment is between 5 percent and 6 percent.

 

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