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Central Bank Says US Economy 'Paused'

  • VOA News

A television screen in a post on the floor of the New York Stock Exchange shows the decision of the Federal Reserve, January 30, 2013.

A television screen in a post on the floor of the New York Stock Exchange shows the decision of the Federal Reserve, January 30, 2013.

Top officials of the U.S. central bank say the economy "paused" in recent months.

That is why the Federal Reserve decided to continue an effort to stimulate the economy. That program involves buying $85 billion worth of bonds a month, and is intended to cut long-term interest rates. The bank is also keeping short term interest rates at the record-low levels where they have been for some time.

The fed action came the same day a study showed the U.S. economy shrank slightly in the last three months of 2012. Government experts blamed the slowdown on cuts in government spending, slowing exports, and businesses keeping smaller inventories.

Wednesday's report from the Commerce Department says the economy shrank at a one-tenth of one percent annual rate in the fourth quarter. That is the worst performance since 2009, during the recession.

The decline is a sharp slowdown from the more than three percent annual growth rate in the prior quarter. This latest report came as U.S. consumers cope with higher taxes and while Washington is considering further spending cuts. Exports have been hurt by a recession in Europe, which cut demand for U.S.-made goods.

Growth was also hurt when businesses cut their stockpiles as managers worried they might not be able to sell all of their goods.

An economic expert at Bankrate.com says businesses are likely to face less political uncertainty in January, February, and March, and the economy is poised to resume slow growth. In an interview with VOA, Greg McBride says with fewer worries, businesses are more likely to stock up on goods to sell, which will give the economy a boost.

The report said overall growth for 2012 was 2.2 percent, a bit better than the prior year.

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