Arab Today, arab today economy picking up fed keeps policy on course
Last Updated : GMT 12:19:12
Arab Today, arab today
Arab Today, arab today

Economy picking up: Fed keeps policy on course

Arab Today, arab today

Arab Today, arab today Economy picking up: Fed keeps policy on course

Washington - AFP

The Federal Reserve said Wednesday that the US economy isrevving up after a winter chill, and kept its monetary policy course unchanged.The Federal Open Market Committee, led by Fed Chair Janet Yellen, concluded aftera two-day meeting that the economy remains in fairly good shape, able to handlethe ongoing cutback in its bond-buying stimulus program, but still in need of anultra-low interest rate.Economic activity "has picked up recently after having slowed sharply during thewinter in part because of adverse weather conditions," the committee said in itspolicy statement.While mixed, the data coming from the labor market, a central focus of the FOMC,has "on balance showed further improvement."But while household spending has picked up, the FOMC noted weak spots, includinglower investment by businesses and slower activity in the housing sector.Those weaknesses were evident in the government's report on first-quarter growth,released earlier Wednesday, which showed the economy stalling in the January-March period, at an annual expansion rate of just 0.1 percent.That was much worse than economists were predicting, and raised some concerns ofa more fundamental downshift from late-2013 than can be blamed on the extremelyharsh winter weather.But the FOMC offered no other interpretation for the first-quarter data than theweather.It made no adjustments to the outlook from its mid-March meeting, when it indicated it saw the economy would be able to continue to growth if it cuts back thestimulus, but at the same time will need the ultra-low interest rate into the secondhalf of 2015.The FOMC did make a fresh $10 billion cut in its bond-buying program, which hasaimed at holding down long-term interest rates to encourage hiring and investment.That took the program to $45 billion a month, beginning in May, down from $85billion in December, when the program taper was launched.But it left the benchmark federal funds rate near zero -- where it has been since theend of 2008 -- noting inflation is restrained while unemployment "remains elevated".Analysts were unsurprised, noting that after significant changes to its policysignaling at the March meeting, this week's FOMC policy review was  a "holdingmeeting" to watch where the economy goes.Harm Bandholz of Unicredit said the signs are that the FOMC will continue thestimulus cuts at a steady pace, wrapping them up with one large step in September.After that, he said, "we project the first rate hike for mid-2015," slightly earlier thanthe market expects.

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