Fed to increase bond purchases slowly

The Fed said it would add $75 billion per month to its portfolio, which increased dramatically, by $1.7 trillion, in quantitative easing programs that ended in March. In a statement, the central banks said new data confirmed "the pace of recovery in output and employment continues to be slow."

Consumer spending, a major swath of the gross domestic product, was "increasing gradually," the Fed said, "but (it) remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit."
Investors had anticipated a renewed purchasing program since August, when Fed Chairman Ben Bernanke began hinting of the possibility. U.S. equity markets headed higher early Wednesday, but turned modestly lower in early afternoon trading. The immediate impact of the announcement maybe delayed until late trading.

The central bank's Open Market Committee elected to keep its overnight lending rate at zero to 0.25 percent.

The strategy of keeping rates low and pumping more money into the economy is not without its critics. Kansas City Federal Reserve President Thomas Hoenig, as expected, voted against the policy action. He has said low rates and extra stimulus could be tempting fate at this point, sparking an asset bubble or unwanted inflation.

Part of the strategy, analysts have said, is to allow prices to rise. Inflation is currently at 1.1 percent on an annual basis. Rising prices, however, could spark consumer and business spending, given the dollar would have less value if spending is delayed.

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