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Federal Reserve to Ease Stimulus Efforts
Federal Reserve Chair Janet Yellen has indicated the central bank might begin raising interest rates "on the order of six months" after it winds down its current bond-buying program.
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Federal Reserve Chair Janet Yellen has indicated the central bank might begin raising interest rates "on the order of six months" after it winds down its current bond-buying program.
The Fed began a massive stimulus program a year ago by buying bonds and mortgage-backed securities at a rate of $85 billion per month. In January it began to gradually phase out the program with monthly cuts of $10 billion. This week's reduction lowered the purchase rate to $55 billion.
In January the Fed said it might phase out the program by year-end if the American economy strengthens sufficiently. Yellen's hint of an interest rate hike perhaps six months thereafter suggests an adjustment could come as soon as 12 months from now.
The Fed lowered its overnight lending rate to 0%-0.25% at the end of 2008 during the economic crisis and has kept it there since then. The central bank said in December it was unlikely to raise rates until inflation rises to 2.5% and unemployment falls to 6.5%.
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