U.S. Stocks Rise as Fed Refrains From Reducing Stimulus

Julie C. Nichols General

Bloomberg – Nick Taborek – Sep 18, 2013 1:11 PM CT

The Standard & Poor’s 500 Index climbed to a record high after the Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs to see more evidence of improvement in the economy.

The S&P 500 (SPX) jumped 0.6 percent to 1,714.18 at 2:04 p.m. in New York, erasing an earlier decline of as much as 0.3 percent. The benchmark index climbed above its all-time high of 1,709.67 reached on Aug. 2.

Sept. 18 (Bloomberg) — David Blanchflower, a Bloomberg Television contributing editor and former Bank of England policy maker, talks about the outlook for Federal Reserve policy. Blanchflower speaks with Sara Eisen and Tom Keene on Television’s "Surveillance." (Source: Bloomberg)

“The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”

Chairman Ben S. Bernanke and his policy making colleagues refrained from paring record accommodation as rising borrowing costs show signs of slowing the four-year expansion. The FOMC has pledged to hold the target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.

The FOMC has been debating how to scale back unprecedented stimulus aimed at stoking economic growth and reducing unemployment that was 7.3 percent in August. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record $3.66 trillion through three rounds of bond buying

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