Nation & World News

Fed Says It Will Continue Stimulus; Markets Reach New Highs

By Eyder Peralta on September 18th, 2013

The Federal Reserve said today that it is not slowing down its monthly purchase of $85 billion in bonds.

The program is intended to stimulate a sluggish economy and the Fed was widely expected to announce that in light of a recovering economy, it was tapering the bond-buying program. Instead, it delivered a surprise that caused the markets to jump, as the Dow and the S&P closed at record highs.

In a statement issued after a meeting of the Federal Open Market Committee, the Fed said it was awaiting more data on the health of the economy before making a decision on the stimulus program:

“Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”

In the past the Fed has spooked the markets, when it hinted that the program may be coming to an end. So, as you might expect, the markets reacted joyously at today’s announcement.

The Fed also kept its short-term interest rate near zero and released its updated economic projections (pdf). The Wall Street Journal reports that most Fed officials expect the interest rate to rise in 2015 or later.

The paper adds:

“New Fed forecasts for the economy and monetary policy show most officials expect to keep interest rates low well into the future. Ten of 17 Fed officials said they expected the central bank’s benchmark interest rate, which is called the fed funds rate, to be at or below 2% by the end of 2016. 14 of 17 officials said they don’t expect the Fed to start raising the fed funds rate until 2015 or later.

“The forecasts also highlight the complex economic environment that Fed Chairman Ben Bernanke confronts. Fed officials, who have been consistently disappointed by economic growth, nudged down their growth forecast for this year and next year, projecting growth between 2% and 2.3% in 2013 and between 2.9% and 3.1% in 2014. Yet Fed officials’ view of unemployment hasn’t changed much. They expect the jobless rate to keep falling to between 7.1% and 7.3% by the end of next year, which is little changed from their June projections.”

Fed Chairman Ben Bernanke is scheduled for a press conference at 2:30 p.m. ET. We’ll update this post with what he has to say.

Update at 4:05 p.m. ET. Dow Closes At Record High:

The Dow and the S&P closed at record highs on today’s news.

CNBC reports:

The Dow Jones Industrial Average spiked nearly 150 points, setting a fresh intraday-high of 15,709.58. Most Dow components closed in positive territory, lifted by Alcoa and Home Depot.

The S&P 500 jumped to hit a new high of 1,729.44. Both indexes posted their best day since June 13.

One analyst told The Wall Street Journal that the surprise action by the Fed was “a big shock, and it’s a massive green light for a risk-on party.”

Update at 2:54 p.m. ET. No Set Calendar:

Sounding a lot like he did in July, Fed Chairman Ben Bernanke said the Fed’s asset-buying program is not on a set calendar.

“We’ll wait for data to make changes, possibly later this year,” Bernanke said, adding that the Fed will decide on when to make changes to the program based on three measures — overall growth, the labor market and inflation.

Bernanke was also asked about his future — whether President Obama had asked him not to serve a third term as chairman or if it was his decision.

“I prefer not to talk about my own plans,” he said.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

This entry was posted in News from NPR. Bookmark the permalink.

Comments are closed.

 

More Stories in News from NPR

Kentucky Is Now Just Two Games Away From Perfect Season

It was down to two final free throws, but the Wildcats finally overcame Notre Dame’s upset bid in a 68-66 win. They’ll go on to face the Wisconsin Badgers in a rematch from last year’s Final Four.


Wandsworth prison in south London in a 2010 photo. Neil Moore, a 28-year-old convicted fraudster, walked out of the prison earlier this month by showing guards a bail letter he'd forged.

British Fraudster Walks Out Of Jail Using Forged Bail Letter

The man, who was serving time for a $2.7 million fraud, simply showed guards the letter and walked free. He later changed his mind and turned himself back in to authorities.


A window sticker on a downtown Indianapolis florist shop this week shows its objection to the Religious Freedom bill passed by the Indiana legislature.

Indiana’s ‘Religious Freedom’ Bill Sparks Firestorm Of Controversy

When Gov. Mike Pence signed a law that allows his state’s businesses to refuse to serve same-sex couples, he could hardly have anticipated the dramatic backlash he’s received.


Yemen's President Abdel Rabbo Mansour Hadi speaks during the opening meeting of the Arab Summit in Sharm el-Sheikh, south of Cairo, on Saturday.

Arab Airstrikes Against Yemen Reportedly Could Continue For Months

At a summit in Egypt, the embattled Yemeni President Abed Raboo Mansour Hadi also described Houthi rebels as “puppets of Iran.”


Nigeria's President Goodluck Jonathan, left, and opposition candidate Gen. Muhammadu Buhari, right, prepare to sign a renewal of their pledge to hold peaceful "free, fair, and credible" elections, at a hotel in the capital Abuja, Nigeria, on Thursday.

Amid Violence, Nigerians Go To The Polls To Choose A President

Incumbent Goodluck Jonathan faces off against former military dictator Muhammadu Buhari in what is being described as the closest contest in the history of the West African country.


Thank you for your support

WUFT depends on the support of our community — people like you — to help us continue to provide quality programming to North Central Florida.
Become a Sustainer
I want to support FM 89.1/NPR
I want to support Florida's 5/PBS
Donate a Vehicle
Underwriting Payments