The Federal Reserve unexpectedly refrained from
“The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said Wednesday at the conclusion of a two-day meeting in Washington. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”
Chairman Ben Bernanke and his policy making colleagues held back from paring record accommodation as rising borrowing costs show signs of slowing the four-year expansion. Treasury yields have jumped since May, when Bernanke first outlined a possible timetable for a reduction in the asset purchases that have swelled the Fed’s balance sheet to $3.66 trillion.
Stocks and Treasuries soared after the statement. The Standard & Poor’s 500 Index climbed 0.9 percent to an intraday record of 1,720.30 at 2:16 p.m. in New York Wednesday. The yield on the 10-Year Treasury note dropped eight basis points to 2.77%.
“Asset purchases are not on a preset course, and the committee’s decisions about their pace will remain contingent on the committee’s economic outlook as well as its assessment of the likely efficacy and costs of such purchases,” according to the statement.
