Ben Bernanke,the U.S. Federal Reserve chairmansaid on Wednesday that the central bank would start scaling back its massive bond-buying program later this year if the economy improves as expected.
At a news conference after the Fed wrapped up its two-day policy meeting, Bernanke said although the Federal Open Market Committee (FOMC), its policy-setting panel, didn't make immediate changes to the pace of bond purchases, it may vary the pace of purchases as economic conditions evolve.
If the incoming data are broadly consistent with forecast, the committee currently anticipates that "it would be appropriate to moderate the monthly pace of purchases later this year," Bernanke noted, adding that if the subsequent data remain broadly aligned with expectations for the economy, the central bank will continue to reduce the pace of purchases "in measured steps" through the first half of next year, and end the purchases around mid-year.
"In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent," he added.
In its updated economic outlook which is also released at the close of the meeting, the Fed appeared to be slightly more optimistic about the economic outlook, especially for the next year.
It expected the U.S. economy to grow at a pace of 2.3 percent to 2.6 percent in 2013, and 3 percent to 3.5 percent in 2014.
The forecast, which is based on the individual projections of the 19 Fed top officials, envisioned the unemployment rate in the 7.2 percent to 7.3 percent range in 2013, and 6.5 percent to 6.8 percent range in 2014.
In an effort to provide more clarity, Bernanke said the Fed expects a "considerable interval" between the cease of bond-buying program and the initial rise in the federal funds rate, which has been kept at the near zero range since late 2008. "The current level of the federal funds rate target is likely to remain appropriate for a considerable period after asset purchases are concluded."
Bernanke also stressed that the move to rein in the quantitative easing is conditional on the incoming data and the evolution of the economic outlook.
"If conditions improve faster than expected, the pace of asset purchases could be reduced somewhat more quickly. If the outlook becomes less favorable on the other hand, or if financial conditions are judged to be inconsistent with further progress in the labor market, reductions in the pace of purchases could be delayed."