Fed begins tapering stimulus program amid job growth

By Lee Chi-dong

WASHINGTON, Dec. 18 (Yonhap) -- The U.S. Federal Reserve announced plans Wednesday to begin cutting bond purchases by $10 billion next month,

The Fed currently buys $85 billion worth of bonds in a stimulus program aimed at injecting vigor into the world's largest economy, hit by a financial crisis in the late 2000s.

"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace of its asset purchases," announced the Federal Open Market Committee (FOMC), ending a two-day meeting in Washington.

The U.S. decision leaves a key task for economic policymakers in South Korea and many other nations -- coping effectively with the possible impact to their economies.

The Fed's move reflects clear signs that the U.S. economy is on a firm recovery track. It would have a positive effect on South Korea's export-driven economy.

But the local currency is likely to appreciate against the U.S. dollar, offsetting possible export gains from the U.S. recovery, analysts say.

Another major challenge is the possibility of outflow of international capital from South Korea.

Meanwhile, the Fed predicts the U.S. economy will grow about 3 percent next year, with unemployment rate standing at as low as 6.3 percent.

It reaffirmed that it would keep short-term rates near zero for the time being.

<All rights reserved by Yonhap News Agency>