The Federal Reserve plans to slow the pace of its purchases of U.S. Treasuries as the recession eases, and signaled that the $300bn program will end in October.
To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October,? the Fed??s Open Market Committee said in a statement in Washington. The program was previously scheduled to end in September.
Policy makers acknowledged signs that the worst recession since the 1930s may be ending, saying that data ??suggests that economic activity is leveling out.? Chairman Ben S. Bernanke??s $1 trillion expansion of the Fed??s balance sheet, providing emergency funding for banks and markets from commercial paper to asset-backed securities, has helped thaw financial markets, which the Fed said have ??improved further in recent weeks.?
Treasuries, which had fallen earlier in the day in the aftermath of an auction of 10-year notes, remained lower. In the afternoon, yields on benchmark 10-year notes were at 3.72 from 3.67 percent yesterday. Stocks remained higher, with the Standard & Poor??s 500 Stock Index advancing 1.8 percent to 1011.87.
Officials left the benchmark interest rate between zero and 0.25 percent after their two-day meeting. The FOMC said economic conditions mean the rate will stay ??exceptionally low? for an ??extended period.? The decision was unanimous.
Policy makers said the economy is ??likely to remain weak for a time? and projected a ??gradual resumption of sustainable economic growth.? Employers cut fewer jobs last month, and the unemployment rate dropped, encouraging analysts to project an annual growth rate of at least 2 percent in the second half of 2009.
The central bank added that ??household spending has continued to show signs of stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.?
