Quantcast

Monday, July 28, 2014         

 Print   Email   Comment | View 2 Comments   Most Popular   Save   Post   Retweet

Fed leaves low interest-rate policies unchanged

By Martin Crutsinger

AP Economics Writer

POSTED:
LAST UPDATED: 09:00 a.m. HST, Oct 30, 2013



WASHINGTON » The Federal Reserve says the U.S. economy still needs support from the Fed's low interest-rate policies because it is growing only moderately.

In a statement released today after a two-day policy meeting, the Fed says it will keep buying $85 billion a month in bonds to keep long-term interest rates low and encourage more borrowing and spending.

It also says it plans to hold its key short-term rate at a record low near zero at least as long as the unemployment rate stays above 6.5 percent and the inflation outlook remains mild.

The Fed again noted that budget policies in Washington have restrained growth, but it made no mention of the 16-day government shutdown. However, the Fed no longer expressed concerns about higher mortgage rates, a concern it flagged in September.

The Fed's policy decision was approved on a 9-1 vote with Esther George, the president of the Kansas City Federal Reserve Bank, dissenting as she has done at each of the central bank's seven meetings this year.

At its previous meeting in September, the central bank surprised investors and economists when it chose not to reduce its bond buying. Since then, the partial shutdown shaved an estimated $25 billion from economic growth this quarter. And a batch of tepid economic data point to a still-subpar economy.

Employers added just 148,000 jobs in September, a steep slowdown from August. And temporary layoffs during the shutdown are expected to depress October's job gain.

Since the September meeting, mortgage rates have fallen roughly half a percentage point and remain near historically low levels. Over the summer, rates had jumped to two-year highs on speculation that the Fed might reduce the pace of its bond purchases before the end of this year.

Few think the Fed will reduce its stimulus any time soon. Many analysts now predict the Fed will maintain the pace of its bond purchases into next year.

If the Fed does start slowing its stimulus in March, it will have left its policy unchanged not just this week but also at its next meeting in December and at its subsequent meeting in late January.

The January meeting will be the last for Chairman Ben Bernanke, who is stepping down after eight years. President Barack Obama has chosen Vice Chair Janet Yellen to succeed Bernanke.

Assuming that Yellen is confirmed by the Senate, her first meeting as chairman will be in March. Many economists think no major policy changes will occur before a new chairman takes over.

Congress' budget fight has clouded the Fed's timetable. Though the government reopened Oct. 17 and a threatened default on its debt was averted, Congress adopted only temporary fixes. More deadlines and possible economic disruptions lie ahead.

A House-Senate conference committee is working toward a budget accord. But wide differences separate Democrats and Republicans on spending and taxes. Without a deal by Jan. 15, another shutdown is possible. Congress must also raise the government's debt ceiling after Feb. 7. If not, a market-rattling default will remain a threat.

The standoff has led economists to trim their forecasts for economic growth in the October-December quarter.







 Print   Email   Comment | View 2 Comments   Most Popular   Save   Post   Retweet

COMMENTS
(2)
You must be subscribed to participate in discussions
By participating in online discussions you acknowledge that you have agreed to the TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. Because only subscribers are allowed to comment, we have your personal information and are able to contact you. If your comments are inappropriate, you may receive a warning, and if you persist with such comments you may be banned from posting. To report comments that you believe do not follow our guidelines, email commentfeedback@staradvertiser.com.
Leave a comment

Please login to leave a comment.
allie wrote:
Tea party really dislikes America and wants its economy destroyed. They are really more of a threat to us than Saudi Arabia's-financed Sunni terrorists.
on October 30,2013 | 10:01AM
what wrote:
Deep down, everyone knows that printing money out of thin air and spending money you don't have to the tune of 17 trillion dollars is wrong. But that is precisely what Obama, Bernanke, Yellen, the Fed, and the likes of Krugman and other Keynesian economists want us to continue to do. And you think the Tea Party is a threat? C'mon.
on October 30,2013 | 10:39AM
IN OTHER NEWS
Breaking News
Blogs
Political Radar
`My side’

Political Radar
‘He reminds me of me’

Bionic Reporter
Needing a new knee

Warrior Beat
Monday musings

Small Talk
Burning money

Political Radar
On policy

Warrior Beat
Apple fallout