Date
18 August 2017
The US Federal Reserve has signaled its confidence over the nation's economic prospects by ending a stimulus program. Photo: Bloomberg
The US Federal Reserve has signaled its confidence over the nation's economic prospects by ending a stimulus program. Photo: Bloomberg

Fed ends bond-buying program, citing labor market gains

The US Federal Reserve said on Wednesday that it is ending its monthly bond purchase program as an improvement in the labor market points to continued economic recovery.

“On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing,” the central bank said after a two-day policy meeting.

The language marks an important departure from the Fed’s prior statements, which had described the labor market slack as “significant”, Reuters noted.

The central bank largely dismissed recent financial market volatility, dimming growth in Europe and a weak inflation outlook as unlikely to undercut progress toward its unemployment and inflation goals.

It said its policy-making committee “continues to see sufficient underlying strength in the broader economy”.

The central bank, however, retained its basic guidance that overnight borrowing costs will remain near zero for a “considerable time” following the end of bond purchases this month.

“If incoming information indicates faster progress toward the committee’s employment and inflation objective than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated,” the statement said.

The dollar rose to a three-week high against a broad basket of currencies following the Fed comments, as traders pulled forward expectations of when the central bank would eventually raise interest rates.

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RC

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