Fed Warns Stimulus Package Will Be Ratcheted Down

Fed Warns Stimulus Package Will Be Ratcheted Down

7:07am Jun 20, 2013

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Those Chinese figures helped Asian markets to take a big tumble today, as did yesterday's comments by Federal Reserve Chairman Ben Bernanke. He said the Fed will likely begin slowing down its economic stimulus later this year. The Fed's massive bond buying program - which is a major part of that stimulus - is seen as a big reason behind recent rallies in the financial market.

NPR's John Ydstie has more.

JOHN YDSTIE, BYLINE: Investors have been nervous about the Fed's intentions after hints from Bernanke a month ago that the Fed might reduce its $85 billion a month bond buying program.

Amid volatile markets, traders and investors complained they wanted more clarity from the Fed. Bernanke obliged, yesterday, after a regular two-day meeting of Fed policymakers. He said, if the Fed's slightly brighter forecast for the economy is realized, it could begin easing back on bond purchases later this year, and he said...

BEN BERNANKE: We will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.

YDSTIE: But Bernanke reminded investors ending bond purchases would not mean an end to the Fed's support of the economy.

BERNANKE: To use the analogy: you're driving an automobile, any slowing in the pace of purchases will be akin to letting up a bit on the gas pedal as the car picks up speed, not to beginning to apply the brakes.

YDSTIE: Fed policymakers reiterated yesterday that they're likely to continue the stimulative policy of extremely low short-term interest rates until the end of 2015.

John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

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