The United States Federal Reserve has maintained the rate of asset purchases at $85 billion a month, but hinted it could begin reeling in the programme known as quantitative easing sometime later this year, and bring the operation to a close by mid-year 2014.
Federal Reserve Chairman Ben Bernanke on Wednesday kept key interest rates at a record low range of between zero and 0.25 percent and maintained the rate of asset purchase at $85 billion a month, but hinted it would be “appropriate to moderate the monthly pace of purchases later this year” as long as the economy grows as expected.
Stressing that the central bank’s policy is in no way predetermined and will depend on the incoming data and the outlook”, Bernanke said that that most of the members of the Federal Open Market Committee foresaw tapering the key stimulus program in the coming months.
"The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year," he told reporters after the FOMC meeting ended.
In addition, he said, if the FOMC's current forecasts for the economy are met, "we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year 2014", when “unemployment would likely be in the vicinity of 7 percent, with solid economic growth supporting further job gains.
In fresh quarterly projections, the central bank said it expects the U.S. economy to grow between 2.3 percent and 2.6 percent in 2013.
It predicts an unemployment rate of about 7.2 percent to 7.3 percent by the end of the year, slightly lower than its March prediction. It expects unemployment to have fallen to 5.8 percent to 6.2 percent by 2015.
According to Bernanke, tapering of the programme was akin to “letting up a bit on the gas pedal” and “not beginning to apply the brakes.”
He added that interest rates were likely to remain low for some time after asset purchases concluded, and any rate rise was likely to be "far in the future".
But some analysts said the Fed was too confident its outlook for the U.S. economy, arguing it remains vulnerable to both domestic spending cuts and slower growth in Europe and China.
"We think the Fed is too optimistic, and that unemployment won't fall below 7.5 percent this year. So we question whether the Fed will end up tapering before 2014," said economist Paul Edelstein of IHS Global Insight.