The Federal Reserve raised interest rates on Wednesday for the second time in three months, citing continued U.S. economic growth and job market strength, and announced it would begin cutting its holdings of bonds and other securities this year, APA reports quoting Reuters.
The decision lifted the U.S. central bank's benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25 percent as it proceeds with its first tightening cycle in more than a decade.
In its statement following a two-day meeting, the Fed's policy-setting committee indicated the economy had been expanding moderately, the labor market continued to strengthen and a recent softening in inflation was seen as transitory.
The Fed gave a clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.
"The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated," the Fed said in its statement.
According to an addendum released with the policy statement, the Fed anticipates that the balance sheet reduction plan would feature halting reinvestments of ever-larger amounts of maturing securities.
The Fed sees the cap for Treasury securities to be $6 billion per month initially, increasing in $6 billion increments at three-month intervals over 12 months until it reaches $30 billion per month.
For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, increasing by $4 billion at quarterly intervals over a year until it reaches $20 billion per month.
Fed Chair Janet Yellen is due to hold a press conference at 2:30 p.m. EDT (1830 GMT).