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

  • Reuters, London
  • |
  • Updated: Jun 21, 2013 02:36 IST

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.

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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