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HindustanTimes Sun,20 Apr 2014

Cash won't flow forever: Fed signals end of stimulus

Reuters  London, June 20, 2013
First Published: 23:00 IST(20/6/2013) | Last Updated: 02:36 IST(21/6/2013)

Federal Reserve Chairman Ben Bernanke's confirmation that the central bank is slowly pulling back on its $85 billion in monthly asset purchases confirmed investor fears, sending stocks and bonds sharply lower, and pushing benchmark Treasury yields to a 15-month high.

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Bernanke stressed that even a slower pace of bond buying would be adding support to the economy, and that any decision to begin removing stimulus was still a long ways off. Any eventual increases in interest rates would also be gradual, he added.

The Fed expects moderate growth to lead to a further healing in the job market as headwinds facing the economy ease, Bernanke said. He also said policymakers expect inflation to move back up toward their long-term 2% goal, and dismissed recent low readings on consumer prices as due in part to temporary factors.

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He said the jobless rate should be down to around 7% from its current 7.6% by the time bond purchases are halted mid-way through next year.

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