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Fed maintains asset purchases policy, stocks spike

Sept. 18, 2013 at 6:26 PM   |   Comments

WASHINGTON, Sept. 18 (UPI) -- The U.S. Federal Reserve said Wednesday it will keep its current monetary policy in place, a decision that sent stock markets soaring.

The Dow Jones industrial average and the Standard & Poor's 500 index both closed at record highs, the Dow closing at 15,676.94, up 147.21, and the S&P closing at 1,725.52, adding 20.76 points on the day.

The Fed said the economy was showing signs of improvement but not enough to change the pace of its asset purchases. With new economic forecasts, the Fed suggested the asset purchasing program, credited with keeping long-term borrowing rates low, will not be changed soon.

The Fed has said it will keep its asset purchasing program in place until the unemployment rate falls to 6.5 percent. It is currently at 7.3 percent.

Other signs of economic strength had fueled speculation the Fed might slow or close down its asset purchasing ahead of schedule.

With unemployment remaining elevated, the Fed said its Open Market Committee, which sets monetary policy, "expects that with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate," which includes keeping inflation in check.

The Fed forecast the unemployment rate would not drop below 6.5 percent until the fourth quarter of 2014.

The Fed said "some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated."

Markets were jolted in June when the first mention of a possible change in asset purchases was mentioned by Fed Chairman Ben Bernanke. Investors have been shifting their markets bets ever since, some interpreting negative economic reports as good news, given it was expected the Fed would then leave its asset purchase program intact, as it has done.

Currently, the Fed is buying $85 billion in long-term securities each month, which is intended to keep borrowing rates low.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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