Turmoil in emerging markets and a month of disappointing job growth at home are unlikely to deter the Federal Reserve from trimming its bond-buying stimulus on Wednesday, as Ben Bernanke wraps up his last policy meeting at the helm of the U.S. central bank.
Overall signs of improvement in the U.S. economy suggest Fed officials will stay on track to cut monthly purchases of Treasuries and mortgage-backed securities by $5 billion each, bringing the total of their monthly asset purchases to $65 billion.
The meeting is Bernanke's last before Vice Chair Janet Yellen moves into the top spot.
Bernanke took the Fed far into uncharted territory during his eight years on the job, building a $4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.
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With those efforts beginning to pay off – and concerns growing over possible harm from so much money printing – the Fed announced plans last month to phase out the bond buying by late this year unless the economy takes a decided turn for the worse.
It started by trimming its monthly purchases to $75 billion from $85 billion, and on Wednesday, the U.S. central bank is expected to shave another $10 billion.
“It's clear the Fed wants to taper,” said Eric Stein, portfolio manager at Eaton Vance in Boston.
Even so, the Fed is nowhere near to making a decision to raise rates. Policymakers are expected to stick to their promise to keep rates near zero until well after the U.S. unemployment rate, now at 6.7 percent, falls to 6.5 percent. The Fed is set to announce its decision at 2 p.m. EST (1900 GMT).
A dismal employment report for December, which showed businesses added far fewer jobs than expected, raised some doubts about the Fed's commitment to keep tapering its stimulus.
But other data in recent weeks, from consumer spending and confidence to industrial production, was largely upbeat and has bolstered the view of an improving economy. Forecasters estimate U.S. GDP grew at an above-trend annual rate of 3.2 percent in the fourth quarter after notching a 4.1 percent advance in the prior three months.
The show of strength provides a welcome backdrop for Bernanke, who steps down on Friday after an unusually tumultuous and highly experimental stint atop the world's most influential central bank.