WASHINGTON -- Federal Reserve policymakers voted Wednesday to start reducing a key stimulus program, signaling greater confidence in the strength of the recovery in the wake of recent upbeat economic data.
The Federal Open Market Committee decided to start tapering the central bank's $85 billion in monthly bond purchases, aimed at holding down long-term interest rates. The program began in September 2012.
Fed officials said they would reduce the purchases by $10 billion a month, starting in January.
In a statement after a two-day meeting, Fed policymakers said they were reducing the purchases to $75 billion a month "in light of cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions."
The Fed policymakers committed to keeping the central bank's short-term interest rate near zero until "well past the time" that the unemployment rate drops below 6.5%. The unemployment rate in November was 7%.
The Fed also largely upgraded its economic forecasts. The unemployment rate next year will range from 6.3% to 6.6%, the central bank now projects, compared with its September forecast of 6.4% to 6.8%.
The economy will grow at a 2.8% to 3.2% annual rate in 2014, the Fed is estimating. That compares to a September forecast of 2.9% to 3.1%.