Washington, Dec 19

The Federal Reserve's policy-making body said Wednesday that the US economy has improved sufficiently to justify reducing its purchases of mortgage-backed securities and Treasury bills from $85 billion a month to $75 billion.

"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labour market conditions, the committee decided to modestly reduce the pace of its asset purchases," the Federal Open Market Committee (FOMC) said after its final meeting of 2013.

Only one member of the 10-member FOMC dissented, according to a statement.

The president of the Federal Reserve Bank of Boston, Eric Rosengren, suggested that it would be premature to reduce the stimulus with unemployment still at 7 percent.

The Fed said it expects US gross domestic product to expand by 2.2 percent to 2.3 percent in 2013, with an inflation rate of around 1.2 percent, below the FOMC's longer-run target of 2 percent.

The official jobless rate will end the year in the range of 7 percent-7.1 percent, the FOMC predicted.

Though global financial markets have long been nervous about the consequence of a Fed decision to taper its asset-buying program, the New York Stock Exchange's Dow Jones index surged by 159.39 points, or 1 percent, to 16,034.65 after Wednesday's announcement.