In the first step towards tapering, the Federal Reserve is reducing its monthly bond purchases from $85 billion to $75 billion, Bloomberg reported. Outgoing Federal Reserve Chairman Ben S. Bernanke undertook the stimulus known as quantitative easing to help facilitate recovery of the US economy from the worst recession ever to hit it since the 1930s.

After a meeting of the Federal Open Market Committee, Bernanke told reporters at a press conference, "Reflecting cumulative progress and an improved outlook for the job market, the committee decided today to modestly reduce the monthly pace at which it is adding to the longer-term securities on its balance sheet."

Already in the final weeks of his eight-year tenure, Bernanke is trimming the purchases that had increased the balance sheet of the Federal Reserve to nearly $4 trillion as he worked to give jobs to the millions of Americans who are out of work. The report said the Fed's decision to taper which was accompanied by its commitment to keep its interest rate low rallied stocks and sent benchmark indexes soaring.

Bernanke said the steps that they will take are going to be data dependent. He said that if there is progress in terms of inflation and the job gains continue then the Fed will continue to undertake a measured reduction in purchases at each meeting. If there is a slowdown in the economy then the reduction skip a meeting or two. Tapering could happen faster if the economy accelerates, Bernanke said.

The Fed continued to give assurances that borrowing costs would not be raised. According to the Fed, its benchmark rate is most likely going to remain low "well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below" its 2 percent goal, the report said.