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Continued: Federal Reserve to begin reducing bond purchases in January because of stronger US job market

  • Article by: MARTIN CRUTSINGER , Associated Press
  • Last update: December 18, 2013 - 6:05 PM

The Fed's low-rate policies have been duplicated by other central banks, from the European Central Bank to the Bank of Japan, that have also sought to energize economic growth and boost inflation.

The Fed's actions Wednesday were approved 9-1. The only member to object was Eric Rosengren, president of the Federal Reserve Bank of Boston. He called the move premature because unemployment remains high and inflation extremely low.

The Fed's action comes after encouraging reports that show the economy is accelerating. Hiring has been robust for four straight months. Unemployment is at a five-year low of 7 percent. Factory output is up. Consumers are spending more at retailers. Auto sales haven't been better since the recession ended 4½ years ago. The stock market is at all-time highs.

And Congress gave final approval Wednesday to legislation that reduces federal spending cuts and averts the risk of another government shutdown early next year.

"It eases a bit of the fiscal restraint in the next couple of years, a period where the economy needs help to finish the recovery," Bernanke said of the congressional deal. "So those things, you know, are positive things."

All of which could enhance the confidence of individuals, businesses and investors.

The economy is improving consistently, said John Silvia, chief economist at Wells Fargo. And the Fed is "now recognizing the trend and decided to go with the flow."

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