The Fed’s bond purchasing program is meant to hold down long-term loan rates to induce Americans to borrow and spend and invest in the stock market. Any reduction in bond purchases — so-called tapering — would weaken market and spook investors, who have been major beneficiaries of the high bond yield rates.
In May, Bernanke told a congressional committee the Fed “could” reduce US bond purchases in “the next few meetings” if the outlook for the labor market improves and the Fed is convinced the improvement can be sustained. If that's the case, the Fed will use today's report and press conference to signal the amount by which it would begin decreasing the pace of purchases, currently $40 billion a month in mortgage bonds and $45 billion in longer-term Treasuries. Investors, however, don't think that the Fed will announce a cut in purchases until their October meeting.