The Herald Bulletin

Morning Update

Breaking News

March 20, 2013

Fed stands by stimulus, sees stronger US economy

WASHINGTON — The Federal Reserve said Wednesday that the U.S. economy has strengthened after pausing late last year but still needs the Fed's extraordinary support to help lower high unemployment.

In a statement after a two-day meeting, the Fed stood by its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent, as long as the inflation outlook remains mild. And it said it would continue buying $85 billion a month in bonds indefinitely to keep long-term borrowing costs down.

Investors seemed pleased with the Fed's decision to maintain its low-interest rate policies. The Dow Jones industrial average was up 76 points nearly an hour after the statement was released at 2 p.m. EDT, up 32 points from just before. The Standard & Poor's 500 stock index also added to its gains on the day.

The unemployment rate has fallen to a four-year low of 7.7 percent, among many signs of a healthier economy.

The Fed noted in its statement that the job market has improved, consumer spending and business investment have increased and the housing market has strengthened. But its latest economic forecasts, also released Wednesday, show that the Fed still doesn't expect unemployment to reach 6.5 percent until 2015.

The Fed also cautioned that government spending cuts and tax increases could slow the economy. It predicts that growth won't exceed 2.8 percent this year, slightly lower than its December forecast of 3 percent.

A total of 13 Fed officials still think the first rate increase won't occur until 2015, the same number as in December. One Fed official thinks the first boost in the short-term lending rate won't occur until 2016.

The statement was approved on an 11-1 vote. Esther George, president of the Kansas City regional Fed bank, dissented for a second straight meeting. She reiterated her concerns that the Fed's aggressive stimulus could heighten the risk of inflation and financial instability.

Text Only
Breaking News
Featured Ads
More Resources from The Herald Bulletin
AP Video
Raw: 2 Shells Hit Fuel Tank at Gaza Power Plant Raw: Massive Explosions From Airstrikes in Gaza Giant Ketchup Bottle Water Tower Up for Sale Easier Nuclear Construction Promises Fall Short Kerry: Humanitarian Cease-fire Efforts Continue Raw: Corruption Trial Begins for Former Va Gov. The Carbon Trap: US Exports Global Warming UN Security Council Calls for Gaza Cease-fire Traditional African Dishes Teach Healthy Eating 13 Struck by Lightning on Calif. Beach Baseball Hall of Famers Inducted Israel, Hamas Trade Fire Despite Truce in Gaza Italy's Nibali Set to Win First Tour De France Raw: Shipwrecked Concordia Completes Last Voyage Raw: Sea Turtle Hatchlings Emerge From Nest Raw: Massive Dust Storm Covers Phoenix 12-hour Cease-fire in Gaza Fighting Begins Raw: Bolivian Dancers Attempt to Break Record Raw: Israel, Palestine Supporters Rally in US Raw: Air Algerie Flight 5017 Wreckage
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium
Front page
Poll

Do you plan to attend one of the public sessions about the Mounds Lake reservoir project?

Yes
No
Not sure yet
     View Results