Wall Street declined, as did US Treasuries, after Federal Reserve Chairman Ben Bernanke said the central bank may begin tapering its US$85 billion-a-month bond-buying program later this year if the economy strengthens in line with its expectations.
Bernanke, who spoke at a press conference after a scheduled two-day meeting of the Federal Open Market Committee, also said the Fed might end the bond-buying program by mid-2014.
"The Committee sees the downside risks to the outlook for the economy and the labour market as having diminished since the fall," the FOMC said in a statement, adding that "inflation over the medium term likely will run at or below its 2-per cent objective."
Policy makers lowered their forecasts for the unemployment rate and inflation, predicting a jobless rate of 7.2 per cent to 7.3 per cent this year, down from 7.3 per cent to 7.5 per cent in their March projection. They expect the unemployment rate to drop to 6.5 per cent to 6.8 per cent next year, compared with 6.7 per cent to 7.0 per cent in March.
"If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year," Bernanke said.