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Fed begins tapering bond purchases

Washington - The US Federal Reserve plans to begin tapering its monetary policy of quantitative easing in January, announcing Wednesday that it would pare purchases of government-backed bonds by 10 billion dollars to 75 billion dollars a month.

"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labour market conditions, the (monetary policy) committee decided to modestly reduce the pace of its asset purchases," the central bank said in a statement.

If the job market continues to gradually improve and currently muted inflation does not slip toward deflation, the Fed will "likely reduce the pace of asset purchases in further measured steps at future meetings," but bond buying is "not on a preset course."

The Fed expects to maintain current interest rates - set near zero since December 2008 - at least until unemployment falls below 6.5 per cent, as long as inflation does not exceed 2.5 per cent and longer-term inflation expectations are "well anchored."//DPA




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