Fed improves view of economy; policy unchanged

The Federal Reserve slightly upgraded its view of the US economy on Tuesday, 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. "Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated," the Fed's policymaking Federal Open Market Committee said in a statement following its March meeting. "Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook." The FOMC meanwhile said that higher oil prices could push up inflation temporarily, but not enough to push the overall rate higher than what the Fed considers allowable for monetary policy. In its brief statement, the Fed gave no hint of the direction of policy, despite a news report last week saying that it was putting in reserve a new "QE3" or quantitative easing stimulus policy to counter the possibility of poor growth.  But the few positive words on employment, which came after last week's strong numbers for new jobs created in February, were a clear shift from the more downbeat tone of Fed chairman Ben Bernanke's testimony on the economy to Congress on February 29. Investors had not expected any policy change from the FOMC meeting, and US stock markets surged briefly at the announcement and then as quickly pared their gains. The market was up for the day overall, the Dow Jones industrials gaining 0.88 percent since opening at 1845 GMT.