Fed to taper massive U.S. stimulus from January

The Federal Reserve announced Wednesday it would begin to taper its massive stimulus program next month as it sees improvement in the U.S. economy and the ailing job market.

The Fed will spend $75 billion on bonds a month starting in January, down from the $85 billion a month it has spent for a year in an effort to tamp down long-term interest rates to stimulate growth and jobs, the Federal Open Market Committee said after a two-day monetary policy meeting.

“In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases,” the FOMC said in a statement.

Noting the federal government's spending cuts since the start of the current asset-purchase program, the FOMC said it “sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy.”

In updates of its economic forecasts, the Fed projected gross domestic product growth between 2.8 percent and 3.2 percent, a tenth point wider than the 2.9-3.1 percent range it projected in September.

It projected the unemployment rate, currently at 7.0 percent, would fall to a range of 6.3-6.6 percent by the end of next year, an improvement from the prior estimate of 6.4-6.8 percent.

The Fed, as widely expected, held its key interest rate at 0-0.25 percent where it has been for five years to support the recovery from recession.