Fed continues to cut stimulus by $10B

The Federal Reserve agreed Wednesday to continue to pare its economic stimulus despite a slowdown in job growth last month.

In a statement after a two-day meeting, the Fed said it will buy $65 billion a month in Treasury bonds and mortgage-backed securities, down from $75 billion. In December, Fed policymakers took their first step in tapering the program begun in September 2012, reducing the bond-buying from $85 billion a month.

The purchases are intended to hold down long-term interest rates and spur the economy and labor market.

FIRST TAKE: Fed action won't cheer markets

FED STATEMENT: Full text

DAVID MARSH: Tests loom for Janet Yellen

In its statement, the Fed noted that since its last meeting "labor market indicators were mixed" and the housing recovery "slowed somewhat." But it added that household spending and business investment "advanced more quickly in recent months." Policymakers also cited the labor market's "cumulative progress" since the Fed began the bond-buying and the improved outlook.

Fed Chairman Ben Bernanke told reporters last month that the Fed would continue to trim the purchases generally in $10 billion increments, assuming economic reports meet Fed projections. Bernanke said the bond-buying likely would be halted by the end of the year.

Employers added only 75,000 jobs last month, down sharply from a 200,000-plus monthly pace since last August. That raised questions about whether the Fed would hold off on tapering this month. But economists cited Labor Department data that indicated much of the decline was due to severe weather that temporarily kept workers at home.

The unemployment rate last month fell to 6.7% from 7%, edging closer to the 6.5% the Fed has identified as a threshold for when it could begin to consider raising its benchmark short-term interest rate. That rate has been near zero since the 2008 financial crisis.

Top 5 Sa! fest Stocks To Own Right Now

But the Fed reiterated Wednesday that it will likely keep the short-term rate near zero "well past" the time that unemployment falls below 6.5%.

The Fed agreed to reduce its purchases of Treasury bonds to $35 billion a month from $40 billion, and its purchases of mortgage-backed securities to $30 billion from $35 billion. The vote was unanimous. Boston Fed chief Eric Rosengren, who dissented to the start of tapering last month, is no longer a voting member of the Fed's policymaking committee.

Despite the weak jobs report, the economy generally has accelerated recently, with economic growth in the second half of 2013 estimated to exceed 3%. Meanwhile, some Fed policymakers have said the risks of the bond-buying, such as eventual high inflation and asset bubbles, have risen.

The meeting was the last for Bernanke, whose second four-year term ends Jan. 31. Bernanke is credited with helping lead the nation from the financial crisis and recession with a series of bold moves to pump cash into the economy. Fed Vice Chair Janet Yellen will succeed him, becoming the first woman to head a major central bank.