The Federal Reserve announced Wednesday that it would continue tapering the size of its monthly bond purchases, saying after Ben Bernanke's last meeting as chairman that the economy has improved enough to reduce the the stimulus by $10 billion to $65 billion.
The cuts will come equally from the central bank's purchases of Treasury bonds and mortgage-backed securities.
Most analysts expected the taper to continue, despite some notable signs of economic weakness in recent weeks. In particular, a weak December jobs report and volatility in emerging markets such as Turkey and South Africa clouded the picture.
Nevertheless, strong gross domestic product and job gains in the last half of 2013 were enough to convince Fed officials that the bond-buying program was on track to meet the goal of "substantial improvement" in labor markets. The statement noted that economic activity has "picked up in recent quarters," with no mention of emerging markets.
The Fed's balance sheet currently checks in at $4.1 trillion, most of which is Treasury securities and mortgage-backed securities. Investors surveyed by CNBC expect the Fed to continue to taper its purchases by $10 billion at each meeting, resulting in about $460 billion more in bond purchases through 2014.
The Fed also kept in place its promise to keep short-term interest rates near zero until "well past the time that the unemployment rate declines below 6 1/2 percent." In recent months Fed officials have emphasized that they will not raise rates immediately when unemployment hits 6.5 percent.
The unemployment rate has fallen faster than expected, to 6.7 percent in December, partly because the labor force participation rate also has dropped as many workers give up looking for work. Nevertheless, the Fed declined to add details about its plans for raising rates to its announcement.
Markets took the announcement as a sign that the Fed is moving to lessen monetary accommodation, with the Dow Jones Industrial Average falling by 200 points.
Wednesday's decision capped a two-day meeting of the Federal Open Market Committee, which sets the central bank's monetary policy. For the first time in years, there were no dissenting votes from the official decision. There were three new voting members of the committee for the new year, including Federal Reserve Bank of Dallas President Richard Fisher, widely regarded as one of the Fed officials most skeptical of the central bank's stimulus efforts. Four voting spots on the FOMC rotate among regional bank presidents.
Janet Yellen, previously the Fed's vice chairwoman, is set to take over from Bernanke as chairwoman in February.