Fed Closes Chapter on Easy Money

Benefit of Bond-Buying Experiment Remains Unclear as Central Bank’s Focus Returns to Interest Rates

The Federal Reserve said it would end its long-running bond-purchase program, concluding a historic experiment that stirred disagreement among policy makers, economists and investors about its impact even though the central bank said it helped accomplish its goal of reducing unemployment.

The move and the Fed’s accompanying assessment of current conditions were a vote of confidence in the U.S. economy, which many economists peg to have grown at an annual pace near 3% or more in the third quarter. That’s a much better performance than in Japan or Europe and a hopeful sign for the world economy when growth in China appears to be flagging.

“There has been a substantial improvement in the outlook for the labor market since the inception of [the] current asset-purchase program,” the Fed said in its policy statement, released Wednesday after a two-day policy meeting. “Moreover, the [Fed] continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.”

The program ends with mixed reviews. While it clearly didn’t cause the inflation outbreak some predicted, it also didn’t clearly lead to a surge of economic output or hiring.

If all goes as they expect, officials will now turn their attention in the months ahead to discussions about when to start raising interest rates and how to signal those moves to the public before they happen. For now the central bank stuck to an assurance that it will keep short-term interest rates near zero for a “considerable time.” Many investors and Fed officials expect no rate increases until the middle of next year.

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