FED TO SHRINK MAS­SIVE CRI­SIS-ERA BOND PILE

Austin American-Statesman Sunday - - MONEY & MARKETS EXTRA -

The Fed­eral Re­serve will be­gin shrink­ing the enor­mous port­fo­lio of bonds it amassed after the 2008 fi­nan­cial cri­sis in an ef­fort to shore up the econ­omy. The move re­flects a strength­ened econ­omy and could mean higher rates on mortgages and other loans over time.

The Fed said it will let a small por­tion of its $4.5 tril­lion bal­ance sheet ma­ture with­out be­ing re­placed, start­ing in Oc­to­ber with re­duc­tions of $10 bil­lion a month and grad­u­ally ris­ing over the next year to $50 bil­lion a month.

The cen­tral bank left its key short-term rate un­changed but hinted at one more hike this year, most likely in De­cem­ber. The Fed pol­i­cy­mak­ers' up­dated eco­nomic fore­casts show an ex­pec­ta­tion for three more rate in­creases in 2018.

At a news con­fer­ence, Chair Janet Yellen said the Fed's two rate hikes this year and its de­ci­sion to be­gin re­duc­ing its bond hold­ings were signs of a solid econ­omy and job mar­ket.

“The ba­sic mes­sage here is U.S. eco­nomic per­for­mance has been good,” Yellen told re­porters.

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