Confident in growth, Fed sets stage for December rate increase

WASHINGTON — Nearly a decade after the Federal Reserve embarked on an unprecedented effort to shore up the collapsing U.S. economy, the central bank said Wednesday it would begin withdrawing some of the trillions of dollars it invested in the wake of the 2008 financial crisis.

The decision, while widely expected, is nevertheless a significant sign the Fed is confident that economic growth and low unemployment will continue. In other words, the central bank believes the U.S. economy is out of the woods.

The Fed’s retreat from its postcrisis stimulus campaign will be slow but steady as the central bank looks to shrink the enormous $4.5 trillion portfolio it amassed through a bond-buying spree.

Those efforts, known as quantitative easing, plunged the Fed into uncharted waters as it tried to navigate the worst financial crisis since the Great Depression. The Fed came under stiff criticism for the program, prompting many Republican lawmakers to question whether the Fed should remain independent. The Fed, which stopped its buying spree in 2014, is now preparing to pare back its holdings by about $10 billion per month initially.

The Fed’s next meetings are scheduled for Oct. 31 and Nov. 1, but the Fed is unlikely to raise rates any sooner than its final meeting of the year, in mid-December.