Federal Reserve announces further tapering of Asset Purchase Program by $10 billion The Federal Open Market Committee planned to cut monthly bond purchases by $10 billion to $65 billion, citing labor-market indicators that were mixed but on balance showed further improvement and economic growth that has picked up in recent quarters. Federal Open Market Committee (FOMC), the arm of the Federal Reserve Bank has announced to continue with tapering of its Asset Purchase Program by another $10 billion to $65 billion starting from February, 2014. This is reduced from $ 75 billion bond buying decision taken for the month of January, 2014. Tapering of bond buying program further is taken on account of improved job market, increased economic growth in recent quarters and sticking to its plan for a gradual withdrawal from departing unprecedented easing policy. In this light, FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to purchase additional agency mortgage-backed securities (MBS) at a pace of about $30 billion per month and longer-term Treasury securities at a pace of about $35 billion per month. The existing January schedules for agency MBS purchases at a pace of $35 billion per month and longer – term Treasury securities purchases at a pace of $40 billion per month remain in effect until that time. The FOMC also directed the Desk to maintain its existing policies of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Purchases of agency MBS will continue to be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market, and purchases of longer-term Treasury securities will continue to be distributed using the existing set of sectors and approximate weights. These purchase distributions could change if market conditions warrant.
Posted on: Thu, 30 Jan 2014 10:14:37 +0000
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