Janet Yellen prepares to succeed Ben Bernanke, Feds trim bond buying

Federal Reserve policy makers trimmed bond buying for a second straight meeting, uniting behind a strategy of gradual withdrawal from Ben S Bernanke’s unprecedented easing policy as Janet Yellen prepares to succeed him as chairman.

Not one word of dissent

The Federal Open Market Committee said it will cut monthly bond purchases by $10 billion to $65 billion, citing labour-market indicators that “were mixed but on balance showed further improvement” and economic growth that has “picked up in recent quarters”.

It was the first meeting without a dissent since June 2011 showing the tapering strategy has brought together policy makers, who are concerned that the Fed’s record $4.1 trillion balance sheet risks causing asset price bubbles, with those who, like Vice Chairman Yellen, say more needs to be done to reduce unemployment.

“As we transition from Bernanke to Yellen, she’s in a pretty good place in terms of holding together the centre of the committee,” said Stephen Stanley, chief economist for Pierpont Securities in Connecticut.

“It should be relatively easy to hold together a pretty wide consensus.” The Fed left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 per cent, “especially if projected inflation” remains below the committee’s longer-run goal of 2 per cent.

US stocks remained lower and Treasuries gained. But global equities hit a two-andhalf-month low on Thursday, raising concern about more emerging markets weakness and pushing investors towards safe-haven bonds.