Martin Crutsinger

WASHINGTON: The Federal Reserve plans to keep a key interest rate at a record low to support a U.S. job market that’s improving but still isn’t fully healthy and help lift inflation from unusually low levels. As expected, it’s also ending a bond purchase program that was intended to keep long-term rates low.

The Fed on Wednesday reiterated its plan to maintain its benchmark short-term rate near zero “for a considerable time.” Most economists predict that the Fed won’t raise that rate before mid-2015. The Fed’s benchmark rate affects the rates on many consumer and business loans.

In a statement ending a policy meeting, the Fed suggested that the job market, though still not back to normal, is strengthening. The statement drops a previous reference to “significant” in referring to an “underutilization” of available workers. Instead, the Fed said that the underutilization of labor resources is “gradually diminishing.” The Fed also said that labor market conditions had improved further with “solid job gains and a lower unemployment rate.”

The change indicates that the Fed believes the labor market, while not completely restored following the Great Recession, is at least in better shape. One of the Fed’s major goals is to achieve maximum employment, which it currently defines as an unemployment rate between 5.2 percent and 5.5 percent. The unemployment rate in September fell to 5.9 percent.

The decision was approved with a 9-1 vote.

Wednesday’s action concludes the Federal Reserve’s economic stimulus program, known as quantitative easing or QE. Launched during the financial crisis in 2008, the Fed began buying huge amounts of bonds in an effort to revive the U.S. economy. It also provoked a political backlash.

Here’s an overview of the QE strategy:

Q: Did the stimulus work?

A: It depends on whom you ask. But many economists say the Fed accomplished the bulk of its aims. By buying mortgage bonds, which many considered toxic at the time, the Fed arguably prevented more banks from failing and breathed life into frozen lending markets.

Q: Why did people have such strong opinions about it?

A: Politicians, investors and even well-respected economists said pumping all that money into the banking system would cause the dollar to plummet and result in rampant inflation. They also feared bubbles in financial markets that would soon pop.

Q: What happened?

A: Since August 2010, when Fed Chairman Ben Bernanke argued for a second round of stimulus, the dollar has gained strength against major currencies and inflation has stayed tame.

Q: What has happened to the stock market since then?

A: If you made a bet on the stock market when Bernanke made his speech in the summer of 2010, your investment doubled. The most widely used benchmark for investment funds, the Standard & Poor’s 500 index, has returned 101 percent since then.

Q: What is the Fed going to do with their $4 trillion in bonds? Does it have to sell them now?

A: No, they can sit on them and unload them very, very slowly if needed, so as not to disrupt the markets.

Q: What will the end of QE mean for markets?

A: Many investors expect more turbulence over the short term. The big question for stock investors is: When will the Fed start hiking its benchmark lending rate? The move is expected to come at some point next year. Investors say more sharp swings in stocks are likely as that day draws closer. But there’s general agreement on Wall Street that the central bank will increase rates slowly enough that it won’t derail the U.S. economic recovery.