Fed cites moderate US growth, takes no new actionBy MARTIN CRUTSINGER
The Associated Press | October 25,2012WASHINGTON — The Federal Reserve said Wednesday that the U.S. economy is improving only moderately and still needs its support to help lower unemployment.
The Fed took no new action after a two-day policy meeting. It wants time to assess whether the aggressive steps it launched in September will boost economic growth and job creation.
In a statement, the central bank said job growth has been slow and the unemployment rate remains elevated. It noted that consumer spending has strengthened slightly and that housing has shown further signs of improvement. But growth in business investment has slowed. The Fed’s updated view of the economy comes less than two weeks before the U.S. presidential election, after a campaign that has focused on the state of the economy.
In its statement, the Fed noted that inflation has recently risen slightly because of higher energy prices. But it said inflation over the long run should remain mild.
The statement was approved on an 11-1 vote. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, objected for the seventh consecutive meeting. Lacker has been concerned that the Fed’s policy steps could lead to higher inflation.
Last month, the Fed began buying mortgage bonds to try to push long-term interest rates lower and make home buying more affordable. It also said it planned to keep its benchmark short-term rate near zero through mid-2015.
The unemployment rate fell in September to 7.8 percent, the first time it’s been below 8 percent since January 2009. But the economy is still growing too slowly to accelerate job growth.
The economy grew at a meager 1.3 percent annual rate in the April-June quarter. Economists think it grew slightly faster in the July-September quarter. The government will report its first estimate of third-quarter growth on Friday.
Still, many employers remain wary of hiring, in part because of tax increases and spending cuts set to kick in next year and also because of a slowing global economy.
The bond purchases the Fed launched last month are designed to lower interest rates and cause stock and home prices to rise, creating a “wealth effect.” When consumers feel wealthier, they’re typically more willing to spend, thereby boosting the economy.
Fed officials reiterated Wednesday that they intend to hold rates low even after the economic recovery has strengthened. That’s a signal that the Fed will keep intervening until the economy grows fast enough to reduce unemployment sharply.
Critics note that interest rates have already been at or near all-time lows. They worry that the Fed’s injection of steadily more money into the financial system will eventually ignite inflation or create dangerous bubbles in the prices of stocks or other assets.
Since the Fed unveiled its latest plans last month, the average rate on a 30-year fixed mortgage has touched 3.36 percent — the lowest since mortgage buyer Freddie Mac began keeping records in 1971. Cheap loans have helped lift home sales, prices and construction — key pillars of the housing market’s gradual but steady comeback.MORE IN National / World BusinessBEIJING — All-expenses-paid trips to reward top salespeople aren’t unusual, but direct marketing... Full StorySINTRA, Portugal — European Central Bank head Mario Draghi said that “growth is too low... Full Story
- Most Popular
- Most Emailed
- RICHARD'S POOR ALMANACK: On this day 1739, 'Richard Palmer' identified in prison at York Castle as the notorious outlaw DICK TURPIN; IN 1836, Battle of the Alamo begins near San Antonio de Bexar, Texas; 1896, the Tootsie Roll invented by LEO HIRSCHFELD.
- RICHARD'S POOR ALMANACK: On this day in 1472, Orkney, Shetland islands put up as collateral by Norway to Scotland in lieu of dowry for MARGARET OF DENMARK on her marriage with JAMES III, king of Scotland; 1962, JOHN GLENN first American to orbit Earth.
- TOMORROW'S HEADLINES TODAY: City mayoral candidates debate campaign issues; Hartford, Conn., woman still missing; Neal Goswami reports attempts to legislate suicide; local woman loses 100 pounds through TOPS program.
- RICHARD'S POOR ALMANACK: On this day in 1878, JOHN TUNSTALL murdered near Lincoln, New Mexico, by the outlaw JESSE EVANS; in 1930, ELM FARM OLLIE first cow to fly in aircraft, first to be milked airborne; 1955, nuke test WASP; '79, snow in Sahara.
- TOMORROW'S HEADLINES TODAY: Rutland Herald News Editor Alan J. Keays and staff writer Gordon Dritschilo discuss stories planned for the February 18, 2015, edition of the newspaper: Winter budgets maxed, legal marijuana, Springfield bank job, USPS slowdown
- RICHARD'S POOR ALMANACK: On this day in 1249 AD, ANDRE of LONGJUMEAU is dispatched by LOUIS IX of France to meet the KHAGAN, ruler of the Mongol Empire; in 1804, during 1st Barbary War, STEPHEN DECATUR scuttles the pirate-held USS Philadelphia in Tripoli.