US Federal Reserve to trim stimulus

Federal Reserve officials said they plan to trim the Central Bank's stimulus efforts in "the coming months". They believe that the US recovery is strengthening, according to minutes of their October meeting.

The US Central Bank is engaged in an $85 billion (£53 billion) a month bond buying program to lower interest rates and boost the US economy.

US markets fell on the news of a potential slowing of easy money.

In the meeting minutes, released on Wednesday, policy makers said they "generally expected that the data would prove consistent with the Committee's outlook for ongoing improvement in labour market conditions and would thus warrant trimming the pace of purchases in coming months".

However, they also stressed that investors should be assured that short-term interest rates will remain low for an extended period - perhaps even after the unemployment rate drops below the 6.5% benchmark.

Many meeting participants indicated a desire to better coordinate the Fed's communication policy regarding the easing back of bond purchases and of interest rates setting.

Mortgages rates spiked over the summer, after outgoing Chairman Ben Bernanke indicated the Central Bank was considering a slowing of its easy money policy. They only declined after the Fed, in a surprise move, decided to maintain the program - known as quantitative easing - after its September meeting.

The last Federal Open Market Committee meeting under Bernanke's leadership will be held on December 17 and 18.

The minutes also noted that Fed policy makers had an unscheduled conference call on October 16 - just before the US was set to breach the so-called debt ceiling and potentially default on its debt obligations.

According to the minutes, policy makers agreed that had Congress been unable to come to an agreement, the situation would have been "potentially catastrophic".

BBC