US sticks to stimulus plan over jobless fears
THE US Federal Reserve has decided against reducing its stimulus for the American economy.
It says it will continue to buy $85bn (€63bn) a month in bonds because it thinks the economy still needs the support. The Fed said in a statement last night that it will maintain the pace of its bond purchases while it awaits conclusive evidence that the economy will strengthen. It issued its statement while also downgrading its outlook for economic growth this year and next.
The bond purchases are intended to keep long-term borrowing rates low to boost spending and economic growth.
"We're in a slow-growth economy with high unemployment and low inflation," said Greg McBride, senior financial analyst at Bankrate.com. "There's no specific catalyst for the Fed to remove stimulus."
In the statement, the Fed said the economy is growing moderately and that some indicators of the job market have shown improvement.
But it noted that rising mortgage rates and government spending cuts are restraining growth.
The Fed also repeated that it plans to keep its key short-term interest rate near zero – at least until unemployment falls to 6.5 percent, down from 7.3 percent last month. In the Fed's most recent forecast, unemployment could reach that level as soon as late 2014.