Fed says economy growing moderately

At a CarMax in Woodbridge, business is booming. The sales team says cars are moving fast - thanks in part to low interest rates.

Marty Cook, the Woodbridge CarMax general manager.

"Sales are terrific,” says Marty Cook, the Woodbridge CarMax general manager.” Interest rates are some of the lowest we have seen in years, so it's a great time to buy right now.”

Lower rates are driving housing sales and retail growth, like car sales, across the country. So investors should have been elated Wednesday when the Fed said it will continue buying bonds to keep rates low.

But instead, the market fell a full 206 points - or 1.4 percent. Why? Because the head of the fed did say that while the central bank isn't putting the brakes on buying bonds, officials might decide it’s time to take their foot off the accelerator if the economy continues to grow and unemployment goes below 7 percent.

The Federal Reserve signaled Wednesday that it's moving closer to slowing its bond-buying program, which is intended to keep long-term interest rates at record lows.

Chairman Ben Bernanke said the Fed could start scaling back its $85 billion in monthly bond purchases later this year if the economy continues to improve. He said the reductions would occur in "measured steps" and that the purchases could end by the middle of next year.

Bernanke likened any reduction in the Fed's bond purchases to a driver letting up on a gas pedal rather than applying the brakes.

Speaking of the economy, he said, "The fundamentals look a little better to us."

Car buyer April Scott is ready to trade in her current car for a bigger family car but says she and her husband hope to move fast - and lock in a lower interest rate now.

"We are kind of in a crunch,” Scott says. “We're trying to do it within the next couple of weeks to see what kind of rate we can get, what kind of car value we can get."

The Associated Press contributed to this story.