Fed Decides to Taper, Stocks Soar

In a somewhat unexpected move on Wednesday, the Fed announced its decision to modestly reduce its stimulus program and stocks soared.

The action was interpreted by many as a clear sign that the Fed now believes that the economy has sufficient momentum and will require less government help going forward.

Putting it all in perspective, the Federal Reserve’s decision is still somewhat modest – to reduce, or “taper” by $10 billion each month the $85 billion in monthly bond purchases it has used to nurture the four-year old recovery.

The private economy “has largely completed its healing process,” New York Federal Reserve Bank president Williaml Dudley said in a recent speech. Dudley blamed the lingering softness this year, when the Fed expects the U.S. economy to grow about 2.2% to 2.3%, on tax increases and spending cuts that took effect in January.

The Fed’s new projections are that the U.S. economy will grow 2.8% to 3.2%.

Tags: Fed, Federal Reserve, taper

Category: Featured, General Update