Federal Reserve Holds QE, Rates Steady; Sees ‘Diminished’ Downside Risks

UPDATE: The markets are selling off as traders fret that a rosier Fed economic outlook may push the central bank to trim back its bond buying sooner than expected. The Dow is down 137 points, or 0.9%, while the broader S&P 500 is off 0.87%. Meanwhile, traders are selling Treasury bonds, sending the yield on the 10-year up 0.13 percentage point to 2.317%.

The Federal Reserve said it will continue buying assets at a clip of $85 billion a month, and hold short-term interest rates at essentially 0% until the unemployment rate falls to 6.5%. The central bank said is prepared to increase or reduce its purchases based on economic conditions. However, downside risks have ‘diminished’ since the fall.

The central bank also said it sees the unemployment rate falling faster than it forecast in March. It now sees the jobless rate clocking in at 6.5% to 6.8% next year, from 6.7% to 7%. At the same time, it also upped its forecast for economic growth in 2014 to 3% to 3.5%, from 2.9% to 3.4%.

Any further major developments will be updated later today.