Fed cuts US bond buying by $10bn

THE US Federal Reserve last night scaled back its support for the world’s largest economy as it declared that the recovery had picked up pace, writes Peter Campbell.

The decision, the last in Ben Bernanke’s tenure, is the second time in as many months that America’s central bank has eased off the process of pumping emergency funds into the economy.

The Fed will reduce its monthly bond-buying programme by $10bn (£6bn) from February to $65bn a month, according to the minutes of the latest meeting, published last night.

In January it cut the rate from $85bn to $75bn.

‘Growth in economic activity picked up in recent quarters’, the Fed said.

It expects that ‘economic activity will expand at a moderate pace and the unemployment rate will gradually decline’.

Last month the Fed surprised markets by cutting back on its support for the economy.

But yesterday’s move was widely expected in spite of recent turmoil in emerging markets, and after the announcement the Dow Jones was down 151 points at 15,777.

It was the final meeting for Ben Bernanke, who hands over the reins to Janet Yellen on Friday after eight years as the world’s most powerful central banker.

He instigated the policy of buying bonds, called quantitative easing, in the midst of the financial crisis.

Analysts expect the US economy to have grown at an annual rate of 3.2pc during the final three months of the year.