Fed sees US economy improving but still shaky

20 March 2013 19:29  [Source: ICIS news]

WASHINGTON (ICIS)--The US economy is returning to a moderate pace following near-zero fourth quarter GDP growth, the Federal Reserve Board said on Wednesday, but the economy still needs continued monetary support and rock-bottom interest rates.

In its statement after a two-day meeting, the Fed’s rate-setting federal open market committee (FOMC) said that US labour conditions have shown signs of improvement but that the unemployment rate remains elevated.

Household spending and business fixed investment have improved, the committee said, noting too that the long-depressed housing sector has strengthened further.

However, the Fed said that it continues to see downside risks to the economic recovery, including a more restrictive fiscal policy.

The Fed – the US central bank – said that it consequently will continue to pump some $85bn (€65.5bn) per month into the US economy through the purchase of mortgage-backed securities and Treasury bonds.

“Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative,” the committee said.

As expected, the Fed said it would maintain its key federal funds interest rate at 0%-0.25% for an extended period, at least until the US unemployment rate falls to 6.5% or less and inflation holds at or near 2% annually.

The US jobless rate is now 7.7%.

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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