Following its much-anticipated two-day meeting, the Federal Reserve announced today that it will begin a moderate taper of its bond-buying program beginning in January.
Rather than a monthly bond purchase of $85 billion, the Fed will now purchase $75 billion in bonds monthly.
Further, the Fed announced in a press release it would keep short-term interest rates near zero as long as the unemployment rate remains about 6.5% and inflation is anticipated to be no more than the Fed’s 2% longer-run goal.
The reason for the slight pullback is the reportedly moderate growth in economic activity, as seen in an improving labor market, a decline in the unemployment rate, and growth in household spending and the housing market. Inflation “has been running below the Committee’s longer-run objective.”
The news was met with mixed results. Janet Yellen, the Fed’s current vice chairwoman currently awaiting Senate confirmation for her nomination as chairwoman, said in her confirmation hearing last month that the quantitative easing policy had made “a meaningful contribution to economic growth.”
The New York Times reported, however, that independent analysts have found that the purchases had had “limited economic benefits.”
The meeting was also the 100th anniversary of the Federal Reserve’s founding in December 1913.
Upon news of the start of the taper, gold prices initially fell to $1,220 an ounce, but then rallied slightly to $1,235. Silver saw little change.
How do you feel about the Fed’s new plans? How will it affect your investing strategy?
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