Quantcast
Get breaking news alerts via email

Click here to manage your alerts
Federal Reserve officials seek to calm financial markets
First Published Jun 27 2013 10:16 am • Last Updated Jun 27 2013 11:28 am

WASHINGTON • Federal Reserve officials sought Thursday to calm investors by assuring them the Fed won’t start trimming its bond purchases until the economy has strengthened. They said any pullback in the Fed’s stimulus will hinge on the economy’s performance, not a calendar date.

The Fed is buying $85 billion a month in bonds to try to keep long-term interest rates low to spur borrowing and spending. Chairman Ben Bernanke jolted investors last week when he said the Fed will likely slow its bond buying this year if the economy continues to improve.

Join the Discussion
Post a Comment

William Dudley, president of the Federal Reserve Bank of New York, said Thursday that if the economy proves weaker than the Fed forecasts, he expects the bond purchases to continue.

The Fed’s timetable for its bond purchases depends on its outlook for the job market and the economy, Dudley stressed at a news conference in New York.

"If labor market conditions and the economy’s growth momentum were to be less favorable," he said, "I would expect that the asset purchases would continue at a higher pace for longer."

Jerome Powell, a member of the Fed’s board in Washington, said investors appear to have incorrectly concluded that the Fed will taper its purchases soon.

"The path of rates will ultimately depend on the path of the economy," Powell said in an appearance at the Bipartisan Policy Center, a Washington think tank. "I want to emphasize the importance of data over date."

A third Fed official, Dennis Lockhart, president of the Atlanta Fed bank, said Thursday that "the pace of purchases, the composition of purchases and the ultimate size of the Fed’s balance sheet still depend on how economic conditions evolve."

Lockhart likened what the Fed is trying to do for the economy to the use of a nicotine patch to help someone give up smoking.

"It seems to me the chairman said we’ll use the patch (and use it flexibly), and some in the markets reacted as if he said ‘cold turkey,’" Lockhart told an audience in Marietta, Ga.


story continues below
story continues below

The market turbulence began with comments Bernanke made in congressional testimony in May. The turbulence intensified with his remarks last week after the Fed ended a two-day policy meeting.

Bernanke said that if the economy improves as much as the Fed is forecasting, it expects to slow its bond purchases later this year. And he said the bond purchases would likely end around the middle of next year, when the Fed thinks the unemployment rate, now 7.6 percent, will be around 7 percent.

Analysts say Bernanke used the 7 percent target to try to help investors gauge whether the economy is improving enough for the Fed to scale back its bond purchases.

Economists have said the earliest the Fed will start reducing bond purchases is at its September meeting. But some say the U.S. economy may not be strong enough for the Fed to slow its bond purchases before December and possibly not until next year.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.