Fed Likely To Announce Reduction Of Bond Buying

A report from Reuters early Wednesday morning anticipated a move by the U.S. Federal Reserve to reduce bond buying. The report arose in the context of a quarterly meeting among executives at the Fed. Such a move could begin the much-discussed tapering agenda, the effort to scale back the immense monetary expansion undertaken by the Fed in recent years. The central bank will issue an official statement detailing the decisions of its meeting at 2:00 pm EST Wednesday afternoon. Many economists believe a reduction will be small, in the neighborhood of $10 billion per month, bringing the monthly total the Fed spends on bonds to $75 billion. Such a move could be one in a sequence of many -- the taper -- possibly ending the Fed's bond-buying program by the middle of next year. Interest rates are expected to remain at zero. The central bank has stated it will not raise interest rates until the unemployment rate falls below 6.5 percent. In August the jobless rate hovered at 7.3 percent. A bond-buying reduction would mark the beginning of the end of an era. Since the grave financial crisis of 2008, the Federal Reserve has carried out an enormous schedule of quantitative easing to stabilize the wounded economy. Through the purchase of bonds, the Fed's balance sheet expanded to a staggering $3.6 trillion. The extreme dovish policy, criticized by many for risking severe inflation, has kept the economy afloat. The looming thunderheads of financial apocalypse have receded. The Fed must now decide how best to encourage the economy forward. The consensus is that new policy will entail the reduction of emergency spending on bonds. The exact scope of the reduction remains to be announced, though reports suggest it will be cautious.