No U-turn on economic aid, Bernanke insists
Thursday 28 April 2011
The US Federal Reserve stood firm in its commitment to an exceptionally loose monetary policy in the world's largest economy, dismissing concerns yesterday over inflation and promising to hold interest rates at their current zero rate for an extended period.
While other central banks around the world have begun to tighten monetary policy – or at least to signal that they soon may – the latest statement by the Fed's federal open market committee (FOMC) was notable for its adherence to previous guidance.
"Economic conditions, including low rates of resource utilisation, subdued inflation trends, and stable inflation expectations, are likely to warrantexceptionally low levels for the federal funds rate for an extended period," it said. The Fed's decision was accompanied by an unprecedented televised press conference by its chairman, Ben Bernanke. Following in the footsteps of other central bankers, including the heads of the Bank of England and the European Central Bank, Mr Bernanke will take questions from the media after each FOMC decision from now on, in the hope that increased access and transparency will defuse persistent criticism of the Fed.
Loose monetary policy, and the subsequent weakness of the dollar, has turned the Fed into a lightning rod for criticism from the right of the political spectrum, but the FOMC appeared unruffled by commodity price inflation, including the above-$100 price of a barrel of oil and the consequent surge in petrol prices in the US. Its slightly brighter assessment of the economy added no new warnings on inflation, except to note that it had "picked up" since the last meeting in March.
"The economic recovery is proceeding at a moderate pace and overall conditions in the labour market are improving gradually" it said.
The Dow Jones Industrial Average spiked higher in the moments after the statement was released, as traders scaled back their expectations for tighter monetary policy later this year. The Fed will finish its programme of quantitative easing – the purchase of $600bn of US Treasuries – by the end of June, but stuck by its promise to keep replacing the bonds when they expire.
The Fed deliberated monetary policy against a backdrop of the continuing high unemployment rate, which was 8.8 per cent last month, and weakening economic growth. GDP figures for the first quarter will be released this morning and are expected to have fallen to around 2 per cent, from anannualised rate of 3.1 per cent in the final three months of 2010.
The last piece of economic datareleased before the GDP number was information on durable goods orders for March, a key gauge of business investment. New orders for manufactured goods meant to last at least three years increased 2.5 per cent, in line with expectations. The figure was even better because the Commerce department revised the figure for February from a decline to an increase of 0.7 per cent.
- 1 Moscow voted the world's unfriendliest city
- 2 The excuses your boss is most likely to believe when you call in sick
- 3 I'm pansexual – here are the five biggest misconceptions about my sexuality
- 4 More than 11,000 Icelanders offer to house Syrian refugees to help European crisis
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Senior British politicians tell David Cameron: When dead children are being washed up on beaches, it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don’t change Europe’s attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...
£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...
Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...