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Fed slows pace of stimulus a bit more, saying economy is growing

The Federal Reserve, with chairman Ben Bernanke at the helm for the last time, trimmed its economic stimulus program on Wednesday by $10 billion to $6...
The Federal Reserve, with chairman Ben Bernanke at the helm for the last time, trimmed its economic stimulus program on Wednesday by $10 billion to $65 billion.GARY CAMERON / Reuters

The Federal Reserve trimmed its unprecedented, massive stimulus program again on Wednesday amid signs that economic growth has picked up in the past few months.

The move by the central bank, announced after Ben Bernanke's last meeting at the helm of the Fed, came despite concerns about turmoil roiling emerging market economies that have slammed the stock market recently. The Fed said it would reduce the bond buying program that helped haul the economy through the Great Recession by $10 billion to $65 billion, as many in the markets had expected.

"Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy," the Fed said in a statement released after a two-day meeting of its policy-setting Federal Open Market Committee.

At its December meeting, the Fed decided to decrease the bond buying program—quantitative easing—by $10 billion to $75 billion. Wednesday's decision takes that down another notch and lends credence to a widely held market belief that the Fed will wrap up QE by the end of 2014. The new balance will see purchases of $30 billion a month in mortgage-backed securities and $35 billion in Treasurys.

"It's been obvious for a few months that the Fed wants out," Bill Gross, co-chief investment officer at bond giant Pimco, told CNBC. "What we're seeing is an end of QE in October, early November of this year, and then importantly a focus on the policy going forward."

The meeting was Bernanke's last before handing over the reins at the Fed to vice-chairman Janet Yellen.

Bernanke took the Fed far into uncharted territory during his eight years on the job, building a $4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.

Policymakers on Wednesday stuck to their promise to keep rates near zero until well after the U.S. unemployment rate, now at 6.7 percent, falls below 6.5 percent, especially if inflation remains below a 2-percent target.

With concerns growing over possible harm from so much money printing, the Fed decided last month to make its first cut to the bond buying.

Data in recent weeks, from consumer spending and confidence to industrial production, was largely upbeat and has bolstered the view of an improving economy. Forecasters estimate U.S. GDP grew at an above-trend annual rate of 3.2 percent in the fourth quarter after notching a 4.1 percent advance in the prior three months.

CNBC Finance Editor Jeff Cox and Reuters contributed to this report.