WASHINGTON: The US Federal Reserve stuck to its plan to buy $85bn in bonds each month to push down borrowing costs and prop up the economy, citing risks to growth from recent budget tightening in Washington.
Describing the economy as expanding moderately in a statement that largely mirrored its March decision, Fed officials cited continued improvement in labor market conditions.
But they reiterated that unemployment is still too high for policy makers’ comfort, reinforcing their desire to keep buying assets until the outlook for jobs improves substantially.
“Fiscal policy is restraining economic growth,” the Fed said in its policy statement. “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation.”
Kansas City Fed President Esther George again dissented against the Fed’s support for growth, due to concerns about financial imbalances and long-term inflation expectations.
Until recently, analysts had expected the Fed to buy a total of $1 trillion in Treasury and mortgage-backed securities during its ongoing third round of quantitative easing, known as QE3, with the Fed starting to take its foot off the accelerator in the second half of the year. Now, things are looking a bit more shaky.
“Expectations for tapering off of the Fed’s outcome-based purchases have been pushed back due to recent softening in the economic data,” according to a statement from the private sector Treasury Borrowing Advisory Committee.
Economic growth rebounded in the first quarter after a dismal end to 2012, but the 2.5 percent annual rate of expansion fell short of economists’ estimates, and forecasters are already penciling in a weaker second quarter.
Reuters
