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Fed Says It Will Begin Tapering Off Its Stimulus In January

Trader Ryan Falvey (center), works on the floor of the New York Stock Exchange on Wednesday. Stocks were modestly higher in early trading on Wall Street Wednesday as the Federal Reserve ends its last two-day policy meeting of 2013.

The Federal Reserve has decided to reduce by $10 billion its monthly bond-buying program beginning in January.

The Federal Reserve Open Market Committee says in a statement:

"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month."

The report comes ahead of a 2:30 p.m. ET statement from Federal Reserve Chairman Ben Bernanke detailing the changes in the stimulus program that the central bank began in September 2012.

The FOMC said:

"The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability."

The committee said it would keep the federal funds rate of 0 to 1/4 percent "at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal."

The decision came amid surprisingly strong job growth in recent months, with the unemployment rate falling to 7 percent, and other indicators that the economy is picking up after the longest economic downturn since the Great Depression.

The Associated Press reports:

"Stocks surged after the Fed's policy statement was released, signaling investors approved of the modest tapering and the stronger pledge to keep short-term rates low for an extended time."

"The Dow Jones industrial average rose more than 150 points minutes after the announcement."

Copyright 2013 NPR. To see more, visit www.npr.org.

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