Fed takes no new steps as economy decelerates, but pledges to help boost growth ‘as needed’

by
August 2, 2012

By Associated Press

WASHINGTON — The Federal Reserve said Wednesday that the U.S. economy is losing strength and repeated a pledge to try to boost growth if hiring remains weak.

The Fed took no new action after a two-day policy meeting. But it appeared to signal in a statement released after the meeting a growing inclination to take further steps to lift the economy out of its funk. The Fed noted that growth had slowed over the first half of the year, with job creation slackening and consumer spending tapering off.

The Fed reiterated its plan to hold its benchmark short-term interest rate at a record low near zero until at least late 2014.

Market reaction to the Fed’s announcement was muted. Stocks fluctuated slightly after the statement was released and ended the day lower.

The Dow Jones industrial average fell 33 points to 12,976, and broader indexes also closed down. The yield on the 10-year Treasury note increased from 1.50 percent to 1.52 percent.

The statement was slightly different than the one issued after the Fed’s last meeting, June 19 and 20.

In addition to noting that the economy had “decelerated,” the Fed’s policymaking committee said it would “closely monitor incoming information” and “will provide additional accommodation as needed” to stimulate the economy and job creation. In the June statement the central bank said “the economy has been expanding moderately” and that it “is prepared to take further action as appropriate.”

Many economists believe the Fed could launch another program of buying government bonds and mortgage-backed securities at its September meeting if the economy doesn’t show improvement. The goal of the program, known as quantitative easing, would be to drive long-term rates, which are already at record lows, even lower.

The Fed’s next move could depend on whether the European Central Bank, which meets Thursday, takes any action to stimulate growth among the 17 countries that use the euro.

The next big signal on the U.S. economy’s health comes Friday, when the U.S. Labor Department reports on July hiring and unemployment trends.

To read more, visit: http://www.washingtonpost.com/business/fed-officials-worried-about-weak-us-economy-could-be-moving-toward-providing-more-help/2012/08/01/gJQApt0TOX_story.html

 
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