Federal Reserve Statements Push Stock Prices Lower

WASHINGTON (AP) — Federal Reserve Chair Janet Yellen says the U.S. economy is "not close to full employment," even as the unemployment rate has dropped a full percentage point over the past 12 months to 6.7 percent.

The Fed downplayed the importance of the unemployment rate as a sign of the economy's health. Fed officials ended their two-day meeting having eliminated a previous commitment to consider raising short-term interest rates once the unemployment rate fell below 6.5 percent. The Fed will assess other measures of the economy as well.

The unemployment rate has fallen despite sluggish growth of 1.9 percent last year, in part because many people have stopped looking for work. Once people stop seeking a job, they're no longer counted as unemployed, and the unemployment rate can fall as a result.

FEDERAL RESERVE

Fed clarifies guidance on short-term rates

WASHINGTON (AP) — The Federal Reserve is seeking to clarify when it might start to raise short-term interest rates from record lows.

The Fed also says it will cut its monthly long-term bond purchases by another $10 billion to $55 billion because it thinks the economy is strong enough to support further improvements in the job market.

The Fed is reaffirming its plan to keep short-term rates low to help support the economy. But it no longer mentions a specific unemployment rate that might lead it eventually to raise short-term rates. The Fed says instead it will monitor "a wide range of information" on the job market, inflation and the economy before approving any rate increase.

It announced the policies in a statement after its first meeting with Janet Yellen as chair.

US-WALL-STREET-CLOSE

US stocks, bonds fall after Fed cuts stimulus

NEW YORK (AP) — Stocks are closing lower after the Federal Reserve said it would cut back further on its economic stimulus. The central bank and its newly installed Chair Janet Yellen also suggested the Fed was moving closer to raising interest rates.

The Standard & Poor's 500 index fell 11 points, or 0.6 percent, to close at 1,860 Wednesday.

The Dow Jones industrial average dropped lost 114 points, or 0.6 percent, to 16,222. The Dow was down as much as 209 points earlier.

The Nasdaq composite fell 25 points, or 0.6 percent, to 4,307.

Financial stocks including Bank of America rose as investors anticipated higher interest rates would mean higher earnings from lending at major banks.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.77 percent from 2.67 percent.