Fed Is Expected To Maintain Stimulative Programs
By MARTIN CRUTSINGER
WASHINGTON (AP) â¿¿ The Federal Reserve on Wednesday is expected to maintain its resolve to keep borrowing costs at record lows despite growing signs that the economy is strengthening.
The Fed will end a two-day meeting with a policy statement and updated economic forecasts. Afterward, Chairman Ben Bernanke will hold a news conference.
Most analysts think policymakers will acknowledge the economy's improvements but leave the Fed's stimulative policies unchanged.Bernanke has said in recent weeks that the job market, in particular, has a long way to go to full health and still needs the Fed's extraordinary support. The unemployment rate, at 7.7 percent, remains well above the 5 percent to 6 percent range associated with a healthy economy. The Fed has said it plans to keep short-term rates at record lows at least until unemployment falls to 6.5 percent, as long as the inflation outlook remains mild. And it foresees unemployment staying above 6.5 percent until at least the end of 2015. Economists think Bernanke will take note of the economy's gains. But most foresee no pullback in the Fed's strategy of keeping short-term rates at record lows and of buying $85 billion a month in Treasurys and mortgage bonds to keep long-term loan rates down. "Even though the economy has improved, it has not improved enough to switch course," says Diane Swonk, chief economist Mesirow Financial. "We don't have unemployment low enough yet." The economy slowed to an annual growth rate of just 0.1 percent in the October-December quarter, a near-stall that was due mainly to temporary factors that have largely faded. Economists think growth has rebounded in the January-March quarter to an annual rate around 2 percent or more. The most recent data support that view. Americans spent more at retailers in February despite higher Social Security taxes that shrank most workers' paychecks. Manufacturing gained solidly in February. And employers have gone on a four-month hiring spree, adding an average of 205,000 jobs a month. In February, the unemployment rate, though still high, reached its lowest point in more than four years.
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