US Federal Reserve may end quantitative easing in October

Central bank says it will end with $15bn taper unless there is a surprise on US economy

US Federal Reserve chairwoman Janet Yellen. Photograph: Andrew Harrer/Bloomberg

US Federal Reserve chairwoman Janet Yellen. Photograph: Andrew Harrer/Bloomberg

Thu, Jul 10, 2014, 01:00

The US Federal Reserve will end its huge QE3 (quantitative easing) programme of asset purchases in October if the economy stays on track, according to the minutes of its June meeting.

The Fed has been slowing its asset purchases by $10 billion every meeting this year, and they currently stand at $35 billion a month. That left doubt about whether the purchases would end in October or December, crucial for judging when the first increase in interest rates might arrive.

In its minutes the central bank says it will end with a $15 billion taper in October unless there is a surprise on the economy. That signals a clear end-date for the programme for the first time.

“If the economy progresses about as the committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting,” say the minutes.

The Fed also made significant steps on agreeing its “exit strategy” when the time does come to raise interest rates. These decisions will shape how future Fed policy is communicated to financial markets. – (Copyright The Financial Times Limited 2014)