Monday November 30th, 2015 11:03PM

Fed says it will continue $85B in bond purchases

By The Associated Press
WASHINGTON (AP) -- The Federal Reserve said Wednesday that it will maintain the pace of its bond-buying program to keep long-term interest rates at record lows. But it offered a more optimistic outlook for the U.S. economy and job market.

The brighter view of the economy could be a hint that the Fed is moving closer to reducing its bond purchases. But the statement issued after the Fed's two-day policy meeting gave no indication of when that might happen.

Investors reacted initially by selling both stocks and bonds. The Dow Jones industrial average was down 34 points shortly after the statement came out; minutes earlier, it had been down just 16. The yield on the 10-year Treasury note shot up to 2.27 percent from 2.21 percent just before the statement came out.

In the statement, the Fed says the economy is growing moderately. And for the first time it said the "downside risks to the outlook" had diminished since fall.

Timothy Duy, a University of Oregon economist who tracks the Fed, calls the statement "an open door for scaling back asset purchases as early as September."

The fact that the Fed foresees less downside risk to the job market "gives them a reason to pull back" on its bond purchases.

The Fed says it will keep buying $85 billion a month in bonds until the outlook for the job market improves substantially. The goal is to lower long-term interest rates to encourage borrowing, spending and investing.

The central bank also said that it would maintain its plan to keep short-term rates at record lows at least until unemployment reaches 6.5 percent.

The Fed also said that inflation was running below its 2 percent long-run objective, but noted that temporary factors were partly the reason.

The Fed also released its latest economic projections on Wednesday, which predicted that unemployment will fall a little faster this year, to 7.2 percent or 7.3 percent at the end of 2013 from 7.6 percent now. It thinks the rate will be between 6.5 percent and 6.8 percent by the end of 2014, better than its previous projection of 6.7 percent to 7 percent.

It said inflation could run as low as 0.8 percent this year. But the Fed predicts it will pick up next year to between 1.4 percent and 2 percent.

The statement was approved on a 10-2 vote. James Bullard, the president of the Federal Reserve Bank of St. Louis, objected for the first time this year, saying he wanted a stronger commitment from the Fed to keep inflation from falling too low.

Esther George objected for the fourth time this year, again voicing concerns about inflation rising too quickly.

Ultra-low rates have helped fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth America lost to the recession.

Financial markets have been gyrating in the four weeks since Chairman Ben Bernanke told Congress the Fed might scale back its effort to keep long-term rates at record lows within "the next few meetings"- earlier than many had assumed.

Bernanke cautioned that the Fed would slow its support only if it felt confident the job market would show sustained improvement. And he also told lawmakers that the Fed must take care not to prematurely reduce its stimulus for the still-subpar economy.

The Fed announced after its September meeting that it would purchase $40 billion a month in mortgage bonds for as long as it deems necessary. And in December, the Fed expanded the program to $85 billion a month, adding $45 billion a month in Treasury bond purchases. The Treasury purchases replaced an expiring bond-purchase program.

Job growth picked up after the Fed announced the latest round of bond purchases. Since October, the economy has added an average of 196,500 jobs a month, up from 157,000 a month in the previous eight months.

Last month, the U.S. economy added a solid 175,000 jobs. But the unemployment rate is still high at 7.6 percent. Economists tend to regard the job market as healthy when unemployment is between 5 percent and 6 percent.
© Copyright 2015
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
S&P 500 index has its best year since 1997
The stock market closed out a record year with more all-time highs on Tuesday, giving U.S. indexes their biggest annual gains in almost two decades.
6:56PM ( 1 year ago )
Colorado readies for 'Green Wednesday' pot sales
Police were adding extra patrols around pot shops in eight Colorado towns that plan to allow recreational sales to anyone over 21 on Jan. 1.
1:52PM ( 1 year ago )
Kerry seeks framework for Mideast peace talks
A senior State Department official says Secretary of State John Kerry will try this week to get Israel and the Palestinians to agree on a framework for negotiating a final peace agreement, yet cautions against raising expectations for Kerry's latest round of shuttle diplomacy.
1:35PM ( 1 year ago )
U.S. News
Missing Ga. bank director arrested in Brunswick
A bank director accused of losing millions of investors' dollars before vanishing last year was arrested Tuesday during a traffic stop in a city in south Georgia.
7:00PM ( 1 year ago )
Amtrak to suspend some Crescent service in Jan., Feb.
Amtrak service will shut down in parts of the Southeast for several days in January and February for rail maintenance by Norfolk Southern Railway.
9:00AM ( 1 year ago )
Lung cancer scans urged for some smokers, not all
Certain current or former heavy smokers should start getting yearly scans for lung cancer to cut their risk of death from the nation's top cancer killer, government advisers said Monday - even as they stressed that the tests aren't for everyone.
7:26AM ( 1 year ago )
Business News
Sex offender held in Hall County for failing to register
A 47-year-old man was booked into the Hall County Jail Tuesday, being held without bond for allegedly failing to register as a sex offender, his second such arrest.
6:09PM ( 1 year ago )
Pharmacy robberies may involve same suspect
Oakwood Police Tuesday afternoon released details in a pharmacy robbery they're investigating, similar to one that happened in the Hall County Tuesday morning.
5:46PM ( 1 year ago )
Victim critical following apartment fire
A 41-year-old woman was in critical but stable condition Tuesday after being rescued from an apartment fire in Forsyth County late Monday afternoon.
3:16PM ( 1 year ago )
Local/State News
White House offers governors info on refugees in their states after Syrian migrants uproar
WASHINGTON (AP) — The White House is proposing to offer governors individualized reports about refugees in their states.White House chief of staff Denis McDonough says in letters to all 50 governors t...
9:08PM ( 1 hour ago )
Standoff at Planned Parenthood ends with suspect's arrest; 3 killed, 9 wounded
COLORADO SPRINGS, Colo. (AP) — A gunman who opened fire inside a Planned Parenthood clinic was arrested Friday after engaging in gun battles with authorities during an hourslong standoff that killed t...
1:13AM ( 2 days ago )
White House undergoes Thanksgiving Day lockdown after man draped in American flag jumps fence
WASHINGTON (AP) — A man draped in an American flag climbed over the fence at the White House on Thursday, prompting a lockdown as the first family celebrated Thanksgiving.The man was immediately appre...
10:11PM ( 4 days ago )
Obama grants reprieve to turkeys 'Honest' and 'Abe' during White House ceremony
WASHINGTON (AP) — President Barack Obama spared two turkeys named for one of the nation's most admired presidents, continuing a White House tradition that provides a refreshing sense of amusement and...
9:18PM ( 5 days ago )
The Latest: UN Security Council strongly condemns 'horrifying' attack in Mali, urges probe
BAMAKO, Mali (AP) — The latest on the attack on a hotel in the Malian capital of Bamako. (All times local):___4:55 a.m.The U.N. Security Council is condemning "the horrifying terrorist attack" at the...
10:58PM ( 1 week ago )