The Federal Reserve has set out a timetable for weaning financial markets off trillions of dollars of central bank aid and guarantees, as it hailed the return to economic growth and signs of improvement in unemployment.
After the final rate-setting meeting of the year, the Fed's open market committee said there would be no extensions of the emergency programmes set up during the financial panic, including foreign currency swaps with other central banks and the lending facilities for investors who want to buy parcels of loans.
It was the first time that the Fed had used its regular statement to the market to remind players that it was winding down its bailout activities, and it came alongside its most upbeat assessment of the US economy for more than two years.
"Economic activity has continued to pick up and the deterioration in the labour market is abating," it said. "The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labour market, modest income growth, lower housing wealth, and tight credit."
Earlier in the day, consumer price data had bolstered the Fed's argument that inflation pressures remain subdued. The Consumer Price Index rose 0.4 per cent in November after a 0.3 per cent gain in October, pushed up by a strong increase in energy costs. Excluding food and energy, prices were flat.
A series of sturdy data, including a sharp rise in prices at the producer level, had fanned speculation that the US central bank could soon be forced to shift away from its pledge to keep interest rates exceptionally low for an "extended period". The Fed maintained that language in its statement yesterday, holding its target rate at the current zero-0.25 per cent range.