Fed Continues To Scale Back Economic Stimulus

By Alan Greenblatt

Published July 30, 2014 at 1:38 PM CDT

Earlier this month, Fed Chair Janet Yellen told Congress that the economy is improving but hasn't bounced back all the way.

The Federal Reserve announced Wednesday that it will ease up slightly on its efforts to stimulate the economy.

Fed officials said that there is still room for improvement in the labor market, but with the economy growing, they expressed concern that inflation might start ticking up.

Continuing its own recent trend, the Fed announced it will be buying up fewer financial assets. It's on track to end its bond-buying program in October.

Starting in August, the Fed will buy $10 billion worth of mortgage-backed securities a month, which is a cut from $15 billion. The bank will also buy $15 billion worth of long-term Treasuries every month, down from $20 billion.

"Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal," reports Bloomberg News.

Earlier Wednesday, the Commerce Department announced that the economy grew by 4 percent in the spring, rebounding from a disappointing first quarter earlier in the year.

But the Fed said it will wait to raise interest rates, which would have a dampening effect on the economy. Earlier this month, Yellen testified before Congress that although the economy is improving, its recovery is not complete.

Today's announcement states that the Fed will keep short-term interest rates low "for a considerable time" after its bond-buying program ends, especially if inflation remains under 2 percent.