Departing Bernanke Puts Brakes on Stimulus

But stocks go up on slight pullback
By Newser Editors and Wire Services
Posted Dec 18, 2013 1:23 PM CST
Departing Bernanke Puts Brakes on Stimulus
In this Feb. 26, 2013 file photo, Federal Reserve Board Chairman Ben Bernanke testifies before the Senate Banking Committee hearing on Capitol Hill.   (Carolyn Kaster)

The Federal Reserve will be hitting the brakes a little on its bond buying gravy train, it announced today, in what will be the last Fed pronouncement under chairman Ben Bernanke. The Fed will cut its bond buying from $85 billion a month to $75 billion a month starting in January, and if the labor market keeps recovering at its current pace, it'll reduce it even further next year. But to cushion the blow, the Fed doubled down on its near-zero short-term loan interest rate, saying it expects to keep it at that level "well past" the time when unemployment falls below 6.5%, the AP reports.

That seems to have been enough to cheer up the market. The Dow shot up about 130 points following the announcement, after dropping before it, according to MarketWatch. The Fed's move "eliminates the uncertainty as to whether or when the Fed will taper and will give markets the opportunity to focus on what really matters, which is the economic outlook," says former Fed economist Roberto Perli. (More Ben Bernanke stories.)

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