WASHINGTON (TheBlaze/AP) -- The Federal Reserve announced Wednesday that it will move forward with a plan to cut its monthly bond purchases starting in February by $10 billion to $65 billion.
The Fed also said it plans to keep short-term rates at record lows to try to reassure investors that it will keep supporting an economy that remains less than fully healthy. In its statement, the Fed upgraded its assessment of the U.S. economy to say "growth in economic activity picked up in recent quarters."
Stocks did not react well.
The Standard & Poor's 500 index fell 18 points, or 1 percent, to close at 1,774 Wednesday. The S&P 500 has ended lower on four of the last five days.
The Dow Jones industrial average lost 189 points, or 1.2 percent, to 15,738.
The Nasdaq composite dropped 46 points, or 1.1 percent, to 4,051.
The Fed announced its tapering decision after Ben Bernanke's final policy meeting. Bernanke will step down Friday after eight years as chairman and will be succeeded by Vice Chair Janet Yellen.
Many global investors fear that reduced Fed bond buying will boost U.S. rates and cause investors to move money out of emerging markets and into the United States for higher returns. Currency values in emerging economies have fallen over that concern.
In response, central banks in emerging economies, from India to Turkey to South Africa, have been acting to counter any damage from the Fed's pullback and the prospect of higher U.S. rates: They've been raising their own rates. These central banks hope to control inflation, boost their flagging currencies and keep investors from fleeing.
But so far, those currencies have continued to weaken.
The action Wednesday was approved on a 10-0 vote. The last time a Fed policy statement was approved unanimously was June 2011.
The Fed's statement repeated a phrase it first used in December: That it would hold its benchmark short-term rate near zero "well past" the time unemployment falls below 6.5 percent. The Fed noted that government spending cuts and tax increases are less of a drag on growth than last year. It also said businesses and consumers are stepping up spending.
The unemployment rate dipped from 7 percent to 6.7 percent in December, the lowest point in five years. Still, much of the decline was due to an exodus of job seekers who gave up looking for work and were no longer counted as unemployed.
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