Fed maintains strong stimulus as US growth stumbles
Thursday, 31 October 2013 01:23
WASHINGTON, Oct 30 (Reuters) - The Federal Reserve extended its support for a slowing U.S. economy on Wednesday, saying it will keep buying $85 billion in bonds per month for the time being.
In announcing the widely expected decision, Fed officials nodded to a weaker growth outlook due in part to a fiscal fight in Washington that shuttered much of the government for 16 days earlier this month.
A rise in borrowing costs following hints from the central bank earlier in the year that it might soon start to ratchet back its monetary stimulus have also weighed on growth.
“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months,” the Fed’s policy-setting Federal Open Market Committee said. “Fiscal policy is restraining economic growth.”
The labor market has shown “some” further improvement, the Fed said, despite some recent weakening in the figures. It dropped a reference to a “tightening of financial conditions observed in recent months” from its list of risks to the outlook.
The Fed shocked financial markets in last month by opting not to scale back its bond buying, after allowing a perception to harden over the summer that it was ready to start easing off on stimulus. Its caution has since been vindicated.