Fed cites 'pause' in growth, stands by stimulus
WASHINGTON — The Federal Reserve says economic growth “paused” in recent months and reaffirmed its commitment to boost a sluggish economy by keeping borrowing cheaply for the foreseeable future.
The Fed took no new action in a two-day policy meeting. But, in a statement released Wednesday, it stood behind aggressive steps it began in December to try to reduce unemployment.
Last month the Fed said it would keep its key short-term interest rate at a record low at least until unemployment falls below 6.5 percent. The rate is 7.8 percent.
And it said it would keep buying $85 billion a month in Treasurys and mortgage bonds to try to keep borrowing costs low and encourage spending.
Earlier in the day, the Commerce Department said the economy shrank at an annual rate of 0.1 percent mainly because companies restocked at a slower rate and the government slashed defense spending.
In its statement, the Fed said “growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.”
Despite the slowdown, the statement noted that hiring continued to expand at a moderate pace, consumer spending and business investment increased and the housing sector showed improvement. And it said strains in global financial markets have eased somewhat but cautioned that risks remain.
In December, the Fed signaled for the first time that it will tie its policies to specific economic barometers. Fed Chairman Ben Bernanke made clear during a news conference that even after unemployment falls below 6.5 percent, the Fed might decide that it needs to keep stimulating the economy. Other economic factors will help shape its policy decisions.
The Fed also it would continue its bond purchases until the job market improved “substantially.”
When it buys bonds, the Fed increases its investment portfolio and pumps more money into the financial system — something critics say could eventually ignite inflation or create dangerous bubbles in assets like real estate or stocks.
On Friday, the government will release its jobs report for January. The unemployment is expected to remain 7.8 percent. That still-high rate, 3½ years after the Great Recession officially ended, helps explain why the Fed has kept its key short-term rate at a record low near zero since December 2008, just after the financial crisis erupted.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Small stores take big gamble by not upgrading credit card readers
- Stop neighbors from stealing your Internet
- Amazon raises bar for other retailers with same-day delivery
- Shopping beacons join list of ‘next big thing’ disappointments
- Yahoo investors losing patience with ‘star’ CEO Marissa Mayer
- Smartphones expected to overtake desktops for holiday shopping
- Collectors willing to overpay for silver, value ‘all in the eye of the beholder’
- Many Black Friday deals not worth the hassle
- Union leaders warn Post-Gazette newsroom of possible layoffs
- Self-driving cars met with rule hurdles
- ‘Word people’ could start careers as court reporters, medical scribes