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The Fed Tiptoes Toward Tapering

The Federal Reserve is taking a step toward unwinding the most aggressive stimulus in its 100-year history.

Yesterday, the FOMC announced plans to reduce the pace of its monthly asset purchases to $75 billion (from $85 billion), starting in January. The trimming will bring Treasury purchases down to $40 billion a month, and mortgage-backed securities purchases down to $35 billion.

Fed Chairman Ben Bernanke, whose term ends on January 31st, said that the decision was based on “cumulative progress and an improved outlook for the job market”.

The market rallied on the news, with the S&P 500 and the Dow closing at record highs.

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