News Column

Fed Keeps Monetary Policy Intact

Jan 30, 2013
economy

The U.S. Federal Reserve said it would continue asset purchase at the rate of $85 billion per month and hold steady with its historically low interest rates.

Consistent with its message in December, the central bank said it would maintain its federal funds rate, the overnight bank-to-bank lending rate, at zero to 0.25 percent until the unemployment rate falls to 6.5 percent or below, while keeping an eye on its target inflation rate of 2 percent or lower.

Over-stimulating the economy can drive prices higher, a problem the policy makers want to avoid, especially with high unemployment.

The current unemployment rate is 7.8 percent. Inflation for 2012 came in at an annual rate of 1.7 percent, but the Commerce Department said Wednesday the gross domestic product shrank 0.1 percent in the fourth quarter.

For the year, the GDP came in a 2.2 percent, which economists say is not high enough to sustain job growth at a pace that will bring down the unemployment rate.

The Fed said economic growth "paused in recent months, in a large part because of weather-related disruptions and other transitory factors."

The weather-related speed bump was Hurricane Sandy, which derailed job growth temporarily.



Source: Copyright United Press International 2013


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