Fed Delays Pullback In Bond Buys, Awaits More Data
The government is also expected to reach its borrowing limit next month. Unless Congress agrees to raise the limit, the government won't be able to pay all its bills.
"This is one of the risks we are looking at," Bernanke said.
The Fed's policy statement was approved on a 9-1 vote. Esther George, president of the Federal Reserve Bank of Kansas City, dissented for the sixth time this year. She repeated her concerns that the bond purchases could fuel high inflation and financial instability.
The decision to maintain its stimulus follows reports of sluggish economic growth. Employers slowed hiring this summer, and consumers spent more cautiously.Super-low rates are credited with helping fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth of many Americans. John Canally, investment strategist at LPL Financial, suggested that markets had overreacted in anticipation of reduced bond purchases. Higher rates "started to impact the real economy, and (the Fed) got a little bit concerned." He said. Economists suggested that the Fed will still eventually scale back its bond buying program, perhaps before year's end. "Tapering will come sooner rather than later, assuming that the economy cooperates," Sung Won Sohn, an economist at California State University Channel Islands, wrote in a research report. "The economy is steady, though not strong, and is moving in the right direction. The unemployment rate is now 7.3 percent, the lowest since 2008. Yet the rate has dropped in large part because many people have stopped looking for work and are no longer counted as unemployed â¿¿ not because hiring has accelerated. Inflation is running below the Fed's 2 percent target. ___ AP Economics Writers Paul Wiseman and Christopher S. Rugaber contributed to this report.
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