US Fed to gradually reduce asset purchases starting November

Headquarters of US Federal Reserve

The US Federal Reserve said it will begin reducing its purchases of bonds starting this month, amid winding down the stimulus program it put in place at the onset of the COVID-19 pandemic.

After a two-day meeting, the Federal Reserve said it would begin reducing its purchases of treasury securities by $10 billion and mortgage-backed securities purchases by $5 billion each month.

Starting later this month, the Federal Open Market Committee (FOMC) will purchase at least $70 billion of treasury bonds a month and $35 billion of mortgage-backed securities, instead of the current $80 billion and $40 billion, respectively, the bank said.

Beginning in December, the committee will purchase $60 billion in treasury bonds and $30 billion in mortgage-backed debt, with the pace of reduction continuing on a monthly basis.

The committee explained that this step came in light of the significant improvement in the US economy towards reaching the target.

The statement indicated that the US Fed will remain ready to adjust the pace of asset purchases if changes in economic outlook warrant.

On the other hand, the Federal Reserve decided to keep the interest rate unchanged at a range between zero and 0.25%.