Arab Today, arab today fed weighs next move amid uncertain us recovery
Last Updated : GMT 22:53:23
Arab Today, arab today
Arab Today, arab today

Fed weighs next move amid uncertain US recovery

Arab Today, arab today

Arab Today, arab today Fed weighs next move amid uncertain US recovery

Washington - AFP

Federal Reserve policymakers weigh their next move on Wednesday as they consider the erratic path of a three-year-old US economic recovery and confront a fresh bout of concern. The Fed\'s interest rate-setting panel is to end two days of meetings here with a decision on whether more stimulus is warranted for a recovery that seemed to be gathering steam before it slowed last month. While Fed Chairman Ben Bernanke has sounded more positive about the state of the economy in recent weeks, high gasoline (petrol) prices, slowing job growth and European debt problems could well raise Fed fears of another springtime stumble. In recent years the US recovery has stalled heading into summer months owing to Middle East revolts, the European debt crisis and the Japanese earthquake. With that burned into the collective conscience, US economists, policymakers and Wall Street have come to greet glimmers of positive news with a certain skepticism. There has been \"a recurring and almost maddening \'stop-go\' pattern to this recovery -- stronger pulses followed by lulls,\" said Joshua Feinman, chief global economist for DB Advisors. \"There does seem to be an underlying improvement in the US economy, albeit a modest and erratic one, very much of the \'two steps forward, one step back\' variety.\" The latest significant setback came with March unemployment figures, which showed the unemployment rate dropping to 8.2 percent but the economy creating a meager 120,000 jobs. Sales of new homes dropped 7.1 percent in March from February\'s surprise spurt, and consumer confidence fell for a second straight month, with newfound optimism tempered by fears over the eurozone debt crisis and fuel prices. None of this has set off alarms, but it puts the Fed in a difficult spot. Shorn of the ability to cut interest rates further -- they are already close to zero -- the Fed will have to decide whether or not to increase controversial asset purchases. The bond and security buying is designed to lower real interest rates, prop up prices and fuel growth-engendering borrowing. But many inside the Fed remain concerned that the measures -- known to economists as quantitative easing -- will fuel inflation. Outside the Fed, emerging market countries have complained that quantitative easing weakens the dollar, making US exports unfairly cheap. Emerging economies are \"paying a high price\" for the loose monetary policies of advanced economies, Brazilian Finance Minister Guido Mantega said on Friday. Faced with a moderate, if uncertain, economic outlook, and good reasons not to push ahead with new stimulus, the Fed is expected to keep what measures it has in place and be prepared to move later should things improve or worsen. \"Despite some choppiness in the monthly data, several measures of activity have grown at a solid pace in the first quarter. An outlook of continued modest growth will likely be sufficient to keep the Fed in \'wait and see\' mode,\" said Peter Newland, an economist at Barclays. Absent any surprise shift by the Fed, investors will probably look closely at the central bank\'s economic forecasts and whether the bank alters its expectation that rates will not rise until late 2014 at the earliest. \"The committee\'s statement, Bernanke\'s press conference and updated forecasts will be sifted for clues about future policy,\" said Nigel Gault of IHS Global Insight.

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