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Fed to start unwinding bond portfolio


The Federal Reserve has said that it will start to run down some of the investments it made to boost the US economy after the financial crisis.In October the Fed will start to reduce a $4.2trn portfolio of US Treasury bonds and mortgage-backed securities, it said.It will initially cut up to $10bn each month from the amount it reinvests.It also said it will hold benchmark interest rates steady, and signalled a rate hike by the end of the year.The widely anticipated move will start to unwind the Fed portfolio it acquired during its bond-buying programmes.The Fed pursued three rounds of quantitative easing between 2008 and 2014 to stimulate the economy after the 2007-2009 financial crisis and recession.What is the US Federal Reserve doing?The US central bank has signalled its plans for months in an effort to avoid rattling markets.Policymakers said at the conclusion of a two-day meeting in Washington that the labour market is strengthening and economic activity rising “moderately” so far this year.They noted the hardship caused by major storms, including Hurricanes Harvey, Irma and Maria, but said they do not expect it to “materially alter the course of the national economy in the medium term”.An economic forecast released after the meeting suggested that a majority of officials see room for another 0.25% rise in the key interest rate set by the Federal Reserve before the end of the year.
Source: BBC