Fed Maintains Bond Buying Awaits Stronger Outlook for Taper

The Federal Reserve extended its support for a slowing U.S. economy on Wednesday, saying it will keep buying $85 billion in bonds per month for the time being.

In announcing the widely expected decision, Fed officials nodded to a weaker growth outlook due in part to a fiscal fight in Washington that shuttered much of the government for 16 days earlier this month.

A rise in borrowing costs following hints from the central bank earlier in the year that it might soon start to ratchet back its monetary stimulus have also weighed on growth.

“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months,” the Fed’s policy-setting Federal Open Market Committee said. “Fiscal policy is restraining economic growth.”

The labor market has shown “some” further improvement, the Fed said, despite some recent weakening in the figures. It dropped a reference to a “tightening of financial conditions observed in recent months” from its list of risks to the outlook.

Esther George, president of the Kansas City Federal Reserve Bank, dissented against the decision as she has at every FOMC meeting this year, favoring a modest reduction in the pace of bond purchases.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza