Fed brings QE3 bond-buying program to an end

The Federal Reserve brought its massive bond-buying program aimed at stimulating the U.S. economy to an end on Wednesday, citing rising evidence that the U.S. economy is improving.

"The committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability," the Fed said after a two-day policy meeting.

America's central bank noted an improving jobs picture in its outlook, saying it has seen slack in the labour market "gradually diminishing."

QE3 ends

Bringing QE3 to an official end wasn't a surprise, as the monthly purchases had been steadily cut from $85 billion US to $15 billion US as part of the Fed's gradual turn away from policies launched to fight the 2007-2009 recession and breathe more life into a tepid recovery.

The Fed will continue reinvesting the proceeds of securities that mature each month, meaning its more than $4.5 trillion balance sheet will remain intact for the time being. That's more than $3 trillion higher than the bank's debt holdings were in 2008.

But it's still an undeniable sign that the U.S. central bank is feeling a bit more confident that the economy can stand on its own two legs.

"Effectively, the decision to end QE is a vote of confidence on behalf of the Fed that the U.S. economic recovery is strong enough to be sustained without additional liquidity," TD Bank economist Michael Dolega said in a note to investors.

Technically, the Fed didn't move its benchmark interest rate from its current low near zero, but few were expecting that to happen anyway. The central bank said it would keep rates where they are "for a considerable time" until the job market has fully rebounded and inflation shows signs of life.

"This isn't the Fed rushing to the exits," Michael Hansen, senior economist at Bank of America Merrill Lynch said.

Currently America's official jobless rate is 5.9 per cent. That's lower than it has been, but the Fed thinks "full employment" would mean a jobless rate of about 5.2 per cent.

"Overall, we still believe that the Fed will begin to raise rates sooner than generally expected, with a March 2015 hike the most likely outcome," Capital Economics Paul Ashworth said in a note to investors after the Fed outlined its thoughts.