Fed Begins Slowing Bond Purchases

WASHINGTON (AP) — 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 percent.

Chairman Ben Bernanke says the Federal Reserve's decision Wednesday to slow its bond purchases is a sign of progress and he expects the Fed to take "similar moderate steps" throughout next year to reduce the purchases further if the economy shows continued improvement.

Bernanke made the comments at a news conference after the Fed announced it would begin to reduce its bond purchases by $10 billion in January.

Still, Bernanke cautioned that the Fed's further reductions in the purchases remain dependent on data.

"When we are disappointed with the outcomes, we could skip a meeting or two; if things pick up, we could go faster," he said.

He noted that the economic recovery still remains far from complete and long-term unemployment remains a concern, he said.