The risks to the US economy have diminished and the Fed is preparing to end its bond purchases in 2014. The central bank could begin to slow down its bond purchases as early as this year. Ben Bernanke said it in the awaited press conference after the decision on interest rates (maintained unchanged). On Wall Street, the indices increase the declines after Bernanke's words with the Dow Jones dropping 0,83% and the Nasdaq 0,77%.
For the time being, the securities purchase policy at 85 billion dollars a month remains confirmed and "information on a slowdown will be provided at the appropriate time," Bernanke specified. The vast majority of the central bank's board agrees to move forward with the program "in times of normalisation". In any case, the Fed reiterates, according to the formula already used, that it is "ready to increase or reduce the size of the purchases of securities according to need".
Inflation expectations are stable while growth estimates have been revised down slightly for this year. The US economy will grow between 2,3%-2,6% against the 2,3%-2,8% estimated in March.
But if the growth forecasts are correct, the purchase of securities will end in mid-2014. “Since last autumn the risks for the American economy have diminished – explained Bernanke – The labor market is also improving, even if unemployment remains elevated". Estimates on unemployment for 2013 have been revised for the better with the rate between 7,2%-7,3% compared to the previous range of 7,3%-7,5%, while the threshold indicated some time ago by the Fed was 6,5% %, and to which expansionary monetary policy was explicitly linked, could be achieved at the end of 2014.
In terms of the cost of money, Bernanke nonetheless confirmed his expectation of historically low rates for a long time to come: in the meeting, the FOMC left the cost of money stable between zero and 0,25% and 18 out of 25 members of the board of the central bank expect that they will remain at this historically low level certainly until the end of 2013. Fifteen out of 19 members believe that rates will remain close to zero also in 2014, while 10 expect rates to rise to 1%, but only by the end of 2015.
To journalists who asked him about his plans at the end of the current mandate, he replied "I have nothing to tell you".
