The Fed has been buying $85 million in bonds each month, and said it will continue to do so until the outlook for the job market improves substantially. When the Fed does pull back on the bond-buying program, Bernanke said it will be like a driver taking a foot off the gas, rather than slamming on the brakes.
Alan Clayton-Matthews, an economist at Northeastern University, said the news from the Fed was more of the same.
“It doesn’t appear to be any different stance,” he said. “It’s neutral. It’s steady as she goes.”
Clayton-Matthews said ending the bond-buying program will be a tricky step to navigate.
“That’s the whole point of Fed policy, to time it correctly,” he said. “The main purpose of the statement was that financial markets would have some idea of what the Fed’s policy would be. It plays down the chance of financial markets being surprised.”
The Dow Jones industrial average closed down 206 points yesterday, as investors sold off stocks and bonds.
But Clayton-Matthews warned that the effects of the Fed’s policy statement would become clearer in the coming days.
“Wall Street can respond to this in any number of rational or irrational ways,” he said.