Federal Reserve Holds Off on Stimulus
Federal Reserve officials are holding off on launching more economic stimulus for now, but gave a strong signal that they would take action if the nation’s jobs data get worse.
Despite mounting speculation on Wall Street and political pressure in the face of faltering economic and job growth, Fed policymakers announced no new action at the conclusion of their two-day meeting Wednesday.
Instead, they gave a slightly more downbeat assessment of the economy than they did in June but noted that the housing market remains depressed. And they repeated their earlier pledge to keep short-term interest rates near zero at least through late 2014. Some analysts were expecting the pledge to be extended through 2015.
The inaction sent stock prices only slightly lower as the U.S. central bank signaled a stronger willingness to launch new measures to pump up the economy. Investors were also hopeful that the Fed’s counterpart in Europe would take action Thursday to help ease the continent’s debt crisis.
Chairman Ben S. Bernanke and his colleagues said they “will provide additional accommodation as needed” to support the economic recovery. In June, the Fed simply said it was “prepared to take further action.”
Some analysts and politicians took the change in wording to mean that the Fed was close to launching another round of massive bond-buying or other efforts to spur investment and growth.
“If you read between the lines of the Fed’s statement, it’s safe to expect that new action is coming soon. It’s just a matter of when,” said Sen. Charles E. Schumer (D-N.Y.), a member of the banking committee who, along with some other Democrats, has exhorted Bernanke to provide more stimulus.
Republican lawmakers, on the other hand, have pressed Bernanke to show restraint. Their concerns are shared by some Fed officials that further monetary easing could trigger inflation down the road