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Abu Dhabi, UAESaturday 23 June 2018

Fed to start unwinding bond portfolio

The Fed pursued three rounds of quantitative easing between 2008 and 2014 to stimulate the US economy

Federal Reserve Chairman Janet Yellen: 'We feel the economy is performing well and we have confidence in the outlook.'. REUTERS/Joshua Roberts
Federal Reserve Chairman Janet Yellen: 'We feel the economy is performing well and we have confidence in the outlook.'. REUTERS/Joshua Roberts

The Federal Reserve has said that it will start to run down some of the investments it made to boost the US economy after the financial crisis.

It will start to reduce a $4.2trn portfolio of US Treasury bonds and mortgage-backed securities next month.

It is aiming to initially cut up to $10bn each month from the amount it reinvests.

Benchmark interest rates steady will be held steady and a rate hike by the end of 2017 was signalled.

As a result, long-term borrowing costs in the US could rise modestly.

Federal Reserve Chair Janet Yellen said: "We feel the economy is performing well and we have confidence in the outlook.”.

The Fed pursued three rounds of quantitative easing between 2008 and 2014 to stimulate the economy after the 2007-2009 financial crisis and recession.

Fed officials are predicting economic growth of 2.4% in 2017, a stronger expansion than they anticipated in June.

US stocks initially fell after the announcement, but pared losses by the end of the day, with both the Dow and the wider S&P 500 closing at new highs.