Fed Reserve Chairman Ben Bernanke told WSJ that the central bank could start winding down its $85 billion-a-month bond-buying program later this year and end it altogether by mid-2014, setting up a high-stakes test to see if the economy and financial markets can begin to stand on their own.
Financial markets—which have been enlivened by the fuel of the Fed's easy-money policies—didn't take the news happily. The Dow Jones Industrial Average finished the day down 206.04, or 1.35%, at 15112.19. Yields on 10-year Treasury notes jumped 0.126 percentage point to 2.308%, the highest level since March 2012. The dollar strengthened. Behind the Fed's strategy for unwinding its bond-buying program were its optimistic new economic forecasts for next year, including a projection that the jobless rate, which was 7.6% in May, will fall to between 6.5% and 6.8% by the end of 2014.