Arab Today, arab today fed pulls trigger on more economic stimulus
Last Updated : GMT 10:07:28
Arab Today, arab today
Arab Today, arab today

Fed pulls trigger on more economic stimulus

Arab Today, arab today

Arab Today, arab today Fed pulls trigger on more economic stimulus

Washington - AFP

The Federal Reserve ended a crunch policy meeting Wednesday with a decision to extend existing stimulus measures until the end of the year, in a bid to tackle subpar US jobs growth. The Fed\'s top policy committee answered market demands for more action to help the world\'s largest economy, by expanding a program designed to lower long-term interest rates that had been due to expire at the end of the month. The central bank will continue to switch short-term US bonds for those dated between six and 30 years, a program worth $267 billion. The Fed\'s move speaks to its concern that the recovery is still not strong enough to be self-sustaining. Since the Fed\'s last meeting US unemployment has ticked up to 8.2 percent and the picture in Europe, particularly Spain, has grown bleaker. Members of the Federal Open Market Committee (FOMC) acknowledged the grimmer outlook. \"Growth in employment has slowed in recent months, and the unemployment rate remains elevated,\" the statement said. \"The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.\" Later Wednesday the bank is expected to lower US growth projections for the year from 2.7 percent. Europe\'s debt crisis also appeared to have a bearing on the Fed\'s decision. \"Strains in global financial markets continue to pose significant downside risks to the economic outlook,\" the FOMC noted. But the decision appears to have been fraught. According to a statement Richmond Fed president Jeffrey Lacker voted against the measures. He \"opposed continuation of the maturity extension program,\" the Federal Reserve said. Wall Street, which had seemed unsure what to expect from the meeting, gave a cautious response to the news. Recently members of the policy-setting committee have expressed vastly different views on whether the Fed can do anything meaningful to juice the economy, allowing speculation about the outcome of the meeting to run riot. Some are likely to be disappointed. Many of the bolder Wall Street analysts expected the Fed to charge to the rescue. Societe Generale economists predicted the Fed may have decided to spend $600 billion more on mortgage securities and US bonds to try to jump-start investment. The more modest bond-swapping plan brings with it concerns that it may not carry a big enough bang, or any bang at all. Although the Fed insists it has so-called bond purchases, or quantitative easing (QE), tools at its disposal, some -- even within the central bank -- wonder if they can offer much help for the 12.7 million Americans who are out of work. Unemployment has been above eight percent for over three years despite the Fed launching a battery of innovative stimulus measures that pushed the limits of central banking. The bank has already lowered interested rates to near zero, absorbed around $2 trillion worth of assets to buoy markets and tweaked bond holdings to lower long-term interest rates. \"We have long held the view that each new round of QE comes with diminishing returns. We nonetheless see the impact as positive if nothing else giving the reassurance of a pilot in the plane,\" said Societe Generale economist Michala Marcussen.

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