Stock markets soar after the Fed says it will cut its stimulus programme

Ben Bernanke said the Federal Reserve’s decision to slow its bond purchases is a sign of progress and he expects the Fed to take “similar moderate steps” throughout next year if the economy shows continued improvement.

Bernanke made the comments at a news conference after the Fed announced it would reduce its bond purchases by 10 billion USD (around 7.3 billion euros) in January.

“Today’s policy actions reflect committee assesment that the economy is continuing to make progress, but that it also has much further to travel before conditions can be judged normal,” Bernanke said.

However Bernanke cautioned that the Fed’s further reductions in the purchases remain dependent on data.

The US stock market rose sharply after the Fed’s announcement that it would slow down its efforts to boost the US economy.

In what amounts to the beginning of the end of its unprecedented support for the US economy, the central bank said it would reduce its monthly asset purchases by 10 billion dollars to total 75 billion dollars )around 54 billion euros).

It trimmed equally from mortgage and Treasury bonds.

The Federal Reserve has rediscovered its roots, in essence that the FED was created to stabilise the financial system in times of panic and we did that.”

The Fed also said its key interest rate would stay lower for even longer than previously promised.