The Federal Reserve announced on Wednesday that it would begin gradually winding down its bond-buying stimulus program next month.
The Fed has been purchasing $85 billion per month in Treasury and mortgage-backed securities. In January, it will reduce its purchases by $10 billion to $75 billion, and then curtail purchases each month afterward. By the end of next year, the Fed plans to end the monthly purchases completely.
In the last year, the Fed has purchased more than $1 trillion in Treasury and mortgage-backed securities. Fed officials have said the purchases have helped to reduce borrowing costs, and it credits the program for helping to contribute to an improving housing market.
The Fed said that it plans to hold short-term interest rates near zero, and any rises likely would not come until the the end of 2015.
Both policies are aimed at holding down borrowing costs.
Previously, the Fed had said it would keep short-term interest rates near zero until the unemployment rate fell to a certain level. But the Fed announced Wednesday that short-term interest rates would stay near zero “well past the time that the unemployment rate declines below 6.5 percent.”
