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Optimistic Fed stops buying bonds to aid economy

Federal Reserve, buoyed by strengthening economy, is easing off stimulus.

By Mary Papenfuss

WASHINGTON DC, D.C., Oct. 30 (UPI) -- The Federal Reserve is so convinced that the U.S. economy is beginning to roar back to life that it's easing off on its stimulus help by ending its bond purchases. The Fed will keep a steady hand by continuing to maintain short-term interest rates near zero for a "considerable time" and will hold and replace at maturity some $4.5 trillion in bonds that it purchased over the last six years. But at their meeting yesterday members dismissed concerns about shaky global financial markets and focused on an uptick in American jobs.

The bond-buying helped feed one of the longest bull markets in U.S. history, and supporters say it kept down the cost of mortgage loans and corporate debt, helping to fuel faster job growth. But critics charge that the bond-buying artificially buoyed the financial markets at the expense of other economic sectors. Still others worry beginning to turn off the tap is premature and the economy still needs help.

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The early verdict on the move was positive in the markets with the dollar soaring to a three-week high against the yen on the Fed's optimism.

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"U.S. currency is back on its uptrend," said an Auckland markets strategist. The optimist Fed statement was a "hawkish surprise to the market," she added.

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