Arab Today, arab today fed to meet with us economic picture fuzzy
Last Updated : GMT 12:35:42
Arab Today, arab today
Arab Today, arab today

Fed to meet with US economic picture fuzzy

Arab Today, arab today

Arab Today, arab today Fed to meet with US economic picture fuzzy

Washington - AFP

The Federal Reserve is unlikely to budge from its easy-money stance when its policy panel meets Tuesday, despite last week\'s strong jobs market numbers, analysts said. Although the economy found its legs to pump out an average of 245,000 net new jobs per month between December and February, the US central bank\'s leadership remains unconvinced about any pickup and is almost certain to keep its ultra-low interest rate in place. More worried about a slowdown, the Fed has even placed a new stimulus plan on the back burner, according to one media report. But that only underscores the challenge for even the experts on how to view the solid pickup in business that US companies are enjoying against the still-huge slack in the employment and housing sectors. \"The Fed will wait for a clearer economic picture before deciding what to do next,\" said Chris Low of FTN Financial. Joseph Balestrino of investment manager Federated said \"we aren\'t looking for anything of substance\" when the Fed releases its post-meeting statement at 2:15 pm (1815 GMT). \"If you\'re a golfer and it\'s sunny, go ahead and hit the links. You\'re not going to miss much,\" he added. Friday\'s better-than-expected data on the labor market in February echoed some other recent good data: layoffs are down, consumer borrowing has grown and Americans are buying new cars at the fastest rate since early 2008. The stock market is also at its best level since then, buoyed by the strong earnings in the corporate sector. All that, and a pickup in inflation in January, would suggest that the US central bank needs to think about how to keep growth and prices under control. But Fed chairman Ben Bernanke sees a cloudier picture. He told Congress last month that the economy is still being held back by the thin wallets of American consumers. \"The fundamentals that support spending continue to be weak,\" he said. \"Real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. Consumer sentiment, which dropped sharply last summer, has since rebounded but remains relatively low.\" The Fed is forecasting that combination will keep overall economic growth at a tepid 2.25 percent this year Bernanke\'s primary worries are the continued slack in the jobs market and housing sector. In February, the overall unemployment rate held steady at 8.3 percent, and the number of jobless at 12.8 million, despite the strong job creation. The reason is that, on top of the official jobless numbers are millions who dropped out of the jobs market altogether in the Great Recession. They are beginning to return, and their presence, it is feared, will keep the unemployment rate stubbornly high, and wage growth flat. Likewise, despite Fed actions that have pushed home loan rates to record lows, there is a huge surplus of homes held by banks and defaulted homeowners dribbling on to the market, keeping prices at rock bottom and the housing construction industry from regaining strength. A third source of concern came from the January trade figures released Friday. They showed a big increase in imports -- especially of higher-priced oil -- which is usually a negative for economic growth. \"We\'re not out of the woods yet,\" economists Nigel Gault and Paul Edelstein of IHS Global Insight said in a research note. \"Soon enough, we\'ll learn how much of the recent improvements were weather-related as we move from a warm winter to a \'par-for-the-course\' spring. Consumers will have a chance to respond to higher gasoline prices and in the background, the eurozone debt crisis will continue.\" The Fed\'s statement will be analyzed for any hint of whether the central bankers see the cup of the perplexing US economy half empty or half full. Some are taking seriously The Wall Street Journal\'s report last week that the Fed has developed, to hold in reserve, a new bond-buying program to boost the US economy that would not add to inflationary pressures. \"They may be more concerned about the economy than we think,\" said Low.

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