Fed will begin to reduce bond purchases by $10B in January because of stronger US job market

WASHINGTON – The Federal Reserve says it will reduce its $85 billion a month in bond purchases by $10 billion starting in January, citing a stronger U.S. job market. And it says it will take further steps to reduce the pace of the purchases next year if that improvement continues.

The reduction is a signal that Fed policymakers are ready to ease their massive support for the economy provided since the Great Recession. The bond purchases have helped keep long-term interest rates low to encourage more borrowing and spending.

To cushion to impact on financial markets, the Fed strengthened its commitment to record-low short-term rates. It says it plans to hold its key short-term rate near zero “well past” the time when unemployment falls below 6.5 per cent.