You are here: Home - Investing -

US stocks jump after Fed begins tapering stimulus

0
Written by:
19/12/2013
US markets soared to new all-time highs on Wednesday as the Federal Reserve made a surprise early move to gradually scale back quantitative easing.

The Federal Reserve will reduce its asset purchase programme by $10bn per month from January 2014, taking it from $85bn to $75bn.

It will scale back its treasury purchases by $5bn to $40bn a month, and its mortgage-backed securities purchases by $5bn to $35bn a month.

The move to gradually scale back the stimulus measures indicates the central bank’s confidence in the improving US economy.

However, it also reaffirmed its commitment to low interest rates, saying interest rates are likely to stay close to zero “well past the time that the unemployment rate declines below 6.5%”, as long as inflation remains below 2.5%.

That statement helped reassure investors that the Fed is not about to begin a cycle of policy tightening.

The Dow climbed 1.84% to 16,168 while the S&P 500 rose 1.66% to 1,810, marking new highs for both indices.

Speaking after the meeting of the Federal Open Market Committee, Fed chair Ben Bernanke (pictured) said improved labour market data in particular had prompted the move, which most economists had not expected to be announced until the FOMC’s January or March meeting.

“Reflecting cumulative progress and an improved outlook for the job market, the committee decided today to modestly reduce the monthly pace at which it is adding to the longer-term securities on its balance sheet,” Bernanke said.

“The action today is intended to keep the level of accommodation the same overall and to push the economy forward. We are committed to doing what is necessary to getting inflation back to target.”

 

Related Posts

Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week