Date
26 September 2017
Fed chairman Janet Yellen has left the US central bank some wiggle room, saying interest rates will remain ultra low for a considerable time. Photo: Reuters
Fed chairman Janet Yellen has left the US central bank some wiggle room, saying interest rates will remain ultra low for a considerable time. Photo: Reuters

Fed to end QE in October but rates to stay near zero

The Federal Reserve plans to end a six-year-old bond-buying program in October but stopped short of saying when it will allow interest rates to rise, according to the Wall Street Journal.   

The United States central bank is hoping to end the monetary policy experiment known as quantitative easing as the economy continues to improve.

The asset-buying program has left the Fed with US$4 million of Treasury and mortgage bonds.

Fed officials laid out plans for raising short-term interest rates, although they don’t intend to implement them until next year.

That means the federal funds rate, which has been kept near zero since December 2008, will have several more months to run.

Fed chairman Janet Yellen is trying to give the central bank room to maneuver in the months ahead after a survey showed a mixed economic landscape marked by slow growth but falling unemployment.

She said interest rates will remain low for a “considerable time” and that would depend on how the economy performs.

Markets responded modestly following the statement.

The Dow Jones Industrial Average rose 24.88 points, or 0.15 percent, to close at a record 17,156.85. Bond prices fell, as yields on 10-year Treasury notes inched up 0.013 percentage point to 2.60 percent.

“The Fed is still looking for a critical mass of signals to start tightening and the ‘considerable time’ phrase has been downgraded to mean nothing at all,” Steve Blitz, chief economist at ITG Investment Research Inc., said in a note to clients.

“[Fed] policy is now running from data release to data release.”

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