March 16, 2011 in Business

Fed says economy is on ‘firmer footing’

Central bank reaffirms pace of Treasury bond buyback
Associated Press
 
Encouraging sign

The Fed no longer characterized progress on bringing down high unemployment as “disappointingly slow.” The unemployment rate has fallen nearly a full percentage point in just three months – the sharpest drop since 1983.

WASHINGTON – The Federal Reserve expressed more confidence in the U.S. economy even as Japan’s nuclear crisis raised worries around the globe.

The Fed said the economic recovery is on “firmer footing” and the jobs market is “improving gradually,” in a statement released after its meeting Tuesday.

That’s a more upbeat tone from its previous meeting on Jan. 26. After that meeting, Fed policymakers said the rate of economic activity was “insufficient” to bring about “significant improvement” in the job market.

The Fed on Tuesday, in a unanimous decision, said it was maintaining the pace of its $600 billion Treasury bond-purchase program to help the economy grow more strongly and to lower unemployment, which now stands at 8.9 percent.

The Fed made no mention of Japan’s crisis, which caused stocks to plunge earlier in the day. But the Fed’s stimulative policy would help the U.S. economy withstand widening economic risks from home and abroad.

The bond-purchase program, which is slated to end in June, is intended to lower loan rates and boost stock prices. Those forces should spur Americans to spend more and companies to hire more.

The Fed also downplayed inflation risks. It said higher prices for energy and other commodities are increasing inflation, but predicted that the pickup in prices will be “transitory.” That’s consistent with the assessment Fed Chairman Ben Bernanke gave to Congress earlier this month. The Fed said it will keep close tabs on inflation trends.

The Fed maintained a pledge to hold its key rate at a record low near zero for an “extended period.”

Many economists don’t think the Fed will start raising rates until early next year. Others think it will be at the end of 2012.

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