In sign of U.S. economy's strength, Fed to start reducing $4.5 trillion balance sheet
Source: The Washington Post
By Heather Long September 20 at 2:06 PM
The Federal Reserve said Wednesday that the U.S. economy is strong enough for the central bank to begin reducing its $4.5 trillion balance sheet in October, gradually unwinding a massive stimulus program started after the economy entered a severe recession nearly a decade ago.
The Fed will scale back its holdings by $10 billion in October and raise that amount gradually in the months to come. After the 2008 financial crisis and ensuing recession, the Fed took the unprecedented step of beefing up its holdings of government bonds and mortgage-related securities from $900 billion to $4.5 trillion in an effort to turn the economy around.
The U.S. economy keeps getting better, according to the central bank. Consumers continue to spend, and business investment is “picking up,” the Fed said. It now projects even faster growth this year of 2.4 percent, an increase from it forecast of 2.1 percent earlier this year. “Hurricanes Harvey, Irma and Maria have devastated many communities … but past experience suggests that the storms are unlikely to materially alter the course of the national economy,” the Fed said in a statement Wednesday.
The Fed did not change interest rates, which remain in a range of 1 to 1.25 percent, but the central bank says it still thinks growth will be strong enough to merit another rate hike by the end of the year and three more in 2018 to bring rates above 2 percent.
Read more: https://www.washingtonpost.com/news/wonk/wp/2017/09/20/in-sign-of-u-s-economys-strength-fed-to-start-reducing-4-5-trillion-balance-sheet/?deferJs=true&hpid=hp_no-name_no-name%3Apage%2Fbreaking-news-bar&outputType=default-article&tid=a_breakingnews&ut
SEPTEMBER 20, 2017 / 1:17 AM / UPDATED 9 MINUTES AGO
Fed keeps rates steady, approves portfolio cuts in October
Howard Schneider, Ann Saphir
WASHINGTON (Reuters) - The U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite recent weak inflation readings.
New economic projections released after the Fed’s two-day policy meeting showed 11 of 16 officials see the “appropriate” level for the federal funds rate, the central bank’s benchmark interest rate, to be in a range between 1.25 percent and 1.50 percent by the end of 2017. That is one-quarter of a point above the current level.
“The labor market has continued to strengthen ... economic activity has been rising moderately so far this year,” the Fed said in its policy statement. It added that the near-term risks to the economic outlook remained “roughly balanced” but that inflation was being watched “closely.”
The interest rate outlook for next year remained largely unchanged, with three hikes envisioned. But the U.S. central bank slowed the pace of projected monetary tightening from there.
It forecasts only two increases in 2019 and one in 2020. It also lowered again its estimated long-term “neutral” interest rate from 3.0 percent to 2.75 percent, reflecting concerns about overall economic vitality.
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http://www.reuters.com/article/us-usa-fed/fed-keeps-rates-steady-approves-portfolio-cuts-in-october-idUSKCN1BV0GJ?il=0
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