Arab Today, arab today fed upgrades view of us economy slightly
Last Updated : GMT 21:42:53
Arab Today, arab today
Arab Today, arab today

Fed upgrades view of US economy slightly

Arab Today, arab today

Arab Today, arab today Fed upgrades view of US economy slightly

Washington - AFP

The Federal Reserve slightly upgraded its view of the US economy, saying the jobs market and consumer and business spending had improved since January. But it kept its ultra-low interest rate and its liquidity-boosting bond repurchase operations in place, citing the depressed housing sector and the lack of inflationary pressures. The outcome of the March meeting of the Fed's policymaking Federal Open Market Committee was expected, as the central bankers have made clear in recent weeks that the positive signs in the US economy are offset by still-high levels of joblessness, flat incomes and the collapsed housing market. The brief post-meeting FOMC statement gave no hint as to the Fed's likely policy direction -- further easing monetary conditions or, on the contrary, tightening to beat back inflation pressures -- for the rest of 2012. Instead, it left in place the rock-bottom 0-0.25 percent interest rate for Fed funds that has been in place for more than three years, and said inflation remains subdued despite the rise in fuel prices. "Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated," the FOMC said. "Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook." The committee said that higher oil prices could drive up inflation temporarily, but not enough to push the overall rate higher than what the Fed considers allowable for monetary policy. Repeating its January stance, the FOMC said that based on a subdued outlook for inflation and other economic conditions, it expects to keep its interest rate at an "exceptionally low" level "at least through late 2014." The Fed appeared not ready to embrace completely Friday's February employment report, which took the monthly average for jobs created to a strong 245,000; or other data showing a surge in consumer spending and a slowdown in layoffs. But the few positive words on employment were a clear shift from the more downbeat tone of Fed chairman Ben Bernanke's testimony on the economy to Congress on February 29. At the time he said consumer sentiment and spending capability remained weak and was holding back the economy. Still, the central bankers gave no hint of the direction of policy, despite months of anticipation that they might embark on a new, third "quantitative easing" program of bond purchases which aims at driving down long-term interest rates to boost industry and the housing market. A Wall Street Journal report last week said the Fed was putting in reserve a new "QE3" plan -- one adapted to have minimal inflationary impact -- to counter the possibility of poor growth. But there was no sign of that from Tuesday's meeting. "The statement was slightly less downbeat on the economy," said RDQ Economics. "This report neither takes a step toward nor backs away from QE3." Ian Shepherdson of High Frequency Economics said that the Fed appeared "desperately keen" to keep long-term interest rates as low as possible, but it was fighting the data to do so. "To that end, it is likely to try for some time yet to keep its public utterances as bearish as possible, without appearing to be out of touch." "This approach will not work indefinitely, though, because the stronger are the incoming numbers, the less inclined will be the markets to listen to the Fed." The news helped give a boost to the dollar but sent US bond prices falling. At 2200 GMT, the dollar traded to $1.3075 per euro, compared to $1.3120 on Monday. But the yield on the 10-year Treasury surged to 2.11 percent from 2.03 percent Monday, while the 30-year increased to 3.25 percent from 3.17 percent.

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