Narendra Modi's Washington test

Narendra Modi's Washington test

If Modi gets the world’s biggest power right, his pursuit of larger global goals...
Small banks or banks for ‘small’ people?

Small banks or banks for ‘small’ people?

Unless appropriate sub-limits are imposed on loans, there is a serious...

US Federal Reserve cuts stimulus by another $10 bn; gives no clear signal on interest rate

Jun 19 2014, 08:13 IST
Comments 0
The Federal Reserve will further slow the pace of its bond purchases because a strengthening U.S. job market needs less support. Reuters The Federal Reserve will further slow the pace of its bond purchases because a strengthening U.S. job market needs less support. Reuters
SummaryUS Fed reiterates its plan to keep short-term rates low 'for a considerable time'.

The Federal Reserve will further slow the pace of its bond purchases because a strengthening U.S. job market needs less support. But it's offering no clear signal about when it will start raising its benchmark short-term rate.

Its decision came in a statement the Fed released Wednesday after a two-day policy meeting. Most economists think a rate increase is at least a year away despite signs of rising inflation.

In its statement, the Fed reiterated its plan to keep short-term rates low "for a considerable time" after it ends its bond purchases, which have been intended to keep long-term loan rates low.

The Fed also downgraded its forecast for growth for 2014, acknowledging that a harsh winter caused the economy to shrink in the January-March quarter. In addition, the Fed barely increased its forecast for inflation.

The Fed's decision means that the monthly purchases of long-term bonds will be reduced from $45 billion to $35 billion starting in July. It marked the fifth cut in the bond purchases since December as the Fed gradually pulls back on the additional support it is providing the economy.

The bond buying is expected to end by the fall.

The Fed's decision was taken on an 11-0 vote with support from the Fed's three newest members, Vice Chairman Stanley Fischer, board member Lael Brainard and Loretta Mester, the new president of the Fed's regional bank in Cleveland.

The statement was nearly identical to the one issued at the Fed's last meeting in April. The slight changes essentially pointed to signs of a strengthening economy now that the harsh winter has passed. The statement said economic activity had ``rebounded,'' with gains seen in the job market, household spending and business investment.

The statement indicated no concern about the recent acceleration in inflation. It repeated language on inflation in which the Fed said it was still concerned that inflation remained below its 2 percent target.

Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...