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Wednesday, July 9, 2014

QE3 to End in October

The Federal Reserve will end its Quantitative Easing program in October, according to the minutes released today from the June 17-18 Federal Open Market Committee meeting. The Federal Reserve has been tapering the pace of purchases by $10 billion per meeting. If economic conditions continue to improve as expected, it will continue this pace until October, when it will reduce the pace by $15 billion, ending asset purchases altogether.

The FOMC wants to develop new plans to communicate forward guidance before rates begin to rise. The minutes stated that, "[It] was observed that it would be useful for the Committee to develop and communicate its plans to the public later this year, well before the first steps in normalizing policy become appropriate." The FOMC is still undecided how to reduce its balance sheet, and when it should stop reinvestment.

The concrete end date of tapering was well received by the markets. The U.S. stock market rose following the release, with the S&P 500 improving 0.4%.

Read the FOMC minutes.

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