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President Barack Obama stands with Ben Bernanke before making a statement on his reappointment as chairman of the Federal Reserve during the President’s vacation on Martha’s Vineyard, Massachusetts, Aug. 25, 2009.
US Federal Reserve begins taper on slow burn
The US Federal Reserve on Wednesday agreed to
begin its taper of bond purchases on a slow burn and investors cheered as Ben
Bernanke, the chairman, prepares to leave office next month.
In the times of Shakespeare, a taper was a type
of candle and the central bank, which launched the latest bond
buying program in September 2012, plans to buy $75bn a month in mortgage and
Treasury bonds as of January, down from $85bn. It will include $35bn monthly of
mortgage securities and $40bn of Treasurys, $5bn less of each. The chairman said
it will cut the monthly amount of its purchases in $10bn increments at
Enter the Ghost of
'How ill this taper burns! Ha! who comes here?
I think it is the weakness of mine eyes
That shapes this monstrous apparition.
It comes upon me. Art thou any thing?
Art thou some god, some angel, or some devil,
That makest my blood cold and my hair to stare?
Speak to me what thou art.'
The Tragedy of Julius Caesar (1599), Act 4 Scene 3, by
The policy-making Federal Open Markets Committee
also confirmed that short-term interest rates would stay low long after
the bond-buying program ends.
The Dow Jones Industrial Average closed he day up 292.71 points, or 1.84%, at
a record 16167.97. Yields on 10-year Treasury notes rose, as often happened with
signs of improving growth, to 2.885%.
The Senate approved a two-year budget
agreement Wednesday, limited but
nevertheless progress after a 16-day government shutdown in October.
“People don’t appreciate how tight fiscal policy has been,” Bernanke said at a
press conference. During the current recovery, federal, state and local
governments have cut 600,000 jobs, he said. By comparison, in the first four
years of the prior recovery the US added 400,000 public-sector workers.
Discussing the Fed's decision
to taper its bond purchasing program and the markets immediate response, with
Diane Swonk, Mesirow Financial chief economist & senior managing director; Scott
Minerd, Guggenheim Partners CIO; Rick Rieder, BlackRock managing director; and
CNBC's Rick Santelli.
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