Fed says it will end bond-buying program

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WASHINGTON --- The U.S. economy and job creation have strengthened enough for the Federal Reserve to end on schedule a program of buying Treasury bonds to help the economy, the Fed said Wednesday.

Ending a two-day meeting, the Fed made no changes to the program. The decision was unanimous. The bond purchases were intended to lower loan rates, encouraging spending, and boost stock prices. But critics worried that the purchases would feed inflation.

The Fed downplayed inflation risks. It acknowledged a spike in oil prices, but concluded that the pickup in inflation will be temporary.

Fed Chairman Ben Bernanke spoke at a news conference after the meeting. It was the first time in the Fed's 98-year history that a chairman has begun holding regular sessions with reporters.

Bernanke said that as long as the Fed continues to say rates will remain at historic lows for "an extended period," rates won't rise until the Fed has met at least twice more. The Fed board meets about every six weeks.

Bernanke said he expects the economy to continue growing through next year and 2013.

He acknowledged that higher gasoline prices are creating a financial hardship for many Americans. But he said the Fed doesn't think gas prices will continue to rise at their recent pace.

Stocks rose after Bernanke's statement. The Dow Jones industrial average, which was up about 50 points when Bernanke began speaking, gained another 50 points half an hour before the market closed.

Bernanke sees risks in job-spur effort

WASHINGTON --- Federal Reserve Chairman Ben Bernanke said Wednesday that the Fed can't take additional steps to try to ease high unemployment without escalating inflation.

If inflation were to accelerate, the Fed would have to raise rates to slow borrowing and spending and blunt price increases. Hiring might then slow.

Speaking at a news conference with reporters, Bernanke sketched a picture of an economy growing steadily but still weighed down by a prolonged period of unemployment, now at 8.8 percent. He acknowledged the pain that is causing, adding that around 45 percent of the unemployed have been without a job for six months or longer.

"We know the consequences of that can be very distressing because people who are out of work for a long time, their skills tend to atrophy," Bernanke said.

But he added:

"It's not clear that we can get substantial improvements in payrolls without some additional inflation risks, and in my view we can't achieve a sustainable recovery without keeping inflation under control."

-- Associated Press


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