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Reduced Fed support reflected in January bond-buying plan

The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013. REUT
The facade of the U.S. Federal Reserve building is reflected on wet marble during the early morning hours in Washington, July 31, 2013. REUT

NEW YORK (Reuters) - The Federal Reserve plans to purchase about $40 billion in longer-dated federal government debt in 18 operations next month, the New York Fed said on Monday, reflecting the U.S. central bank's decision to trim its support for the economy.

In what came as a surprise to some investors, earlier this month the Fed decided to cut its bond-buying program, known as quantitative easing, by $10 billion to $75 billion per month. It reduced purchases of both Treasuries and mortgage bonds by $5 billion each.

The Fed cited a stronger job market and economic growth in its landmark decision, which amounts to the beginning of the end of the largest monetary policy experiment ever.

The New York Fed, which carries out monetary policy in financial markets, will pare purchases broadly across a spectrum of securities maturing between 2018 and 2043, according to the plan. For the detailed schedule, see http://www.newyorkfed.org/markets/tot_operation_schedule.html

To recover from the recession, the central bank has held interest rates near zero since late 2008 to spur growth and hiring. It also has quadrupled the size of its balance sheet to around $4 trillion through three rounds of massive bond purchases aimed at holding down longer-term borrowing costs.

Fed Chairman Ben Bernanke, who is scheduled to step down on January 31, told reporters after the December 18 decision that this gradual rate of reductions would likely be maintained over the course of 2014.

Nearly all economists polled by Reuters now expect the Fed to continue to pare its bond-buying throughout 2014, until it is completely wound down before the start of 2015.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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