WASHINGTON: Despite increasing jitters about the global economy, Federal Reserve policymakers on Wednesday gave an upbeat take on the economy and stuck to their plan to keep reducing their large bond-buying stimulus program.
Concluding its first policy session of the year — and its last meeting with Ben S. Bernanke as chairman — the Fed decided to make another $10 billion cut in its monthly purchases of bonds, which have been aimed at lowering long-term interest rates and spurring investment and lending.
The decision was expected. After the Fed last month announced an initial $10 billion tapering of its $85 billion-a-month program, Bernanke indicated that the central bank was likely to take similar steps at each meeting, so long as the economy kept improving as projected.
Still, in recent days the relatively bright outlook for the U.S. and global economies at the start of the year has been clouded somewhat by a sell-off in currencies of major emerging countries such as Brazil, Turkey and South Africa.
The instability hurt stock markets globally and shook some investors’ confidence. Also, some recent data on China’s manufacturing sector and the U.S. economy have come in weaker than expected.
The Fed, in its policy statement Wednesday, gave no hint that it was alarmed by the broad retreat in emerging markets, stating as it did last month that “the committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced.”
Fed officials, however, did give a nod to the weaker-than-expected job market in December, noting in the statement this time that “labor market indicators were mixed,” although they “on balance showed further improvement.”
Fed policymakers again noted that the housing market “slowed somewhat,” but they upgraded their assessment of household spending and business investment, saying they both “advanced more quickly in recent months.”
For Bernanke, the decision to keep tapering the stimulus and affirming cautious optimism in the economy marked the end of his eight years as Fed chairman. For his last act, all members of the policymaking committee voted with him.