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October 30, 2013

US Central Bank to Continue Direct Boost to Economy

by VOA News

The U.S. central bank is going to continue to try to boost the American economy through stimulative measures, saying it needs more evidence the world's largest economy is improving before cutting back on direct support of it.

The Federal Reserve said Wednesday it would continue to buy $85 billion worth of securities a month to pump more money into the American economy and keep a benchmark interest rate near zero percent. It is an effort the Fed started more than a year ago, but one that has failed to significantly boost the country's economic advance.

Earlier in the year, the Fed said it hoped to begin to trim its direct support of the economy by now and end it by mid-2014. But in its latest report, it said the asset purchases "are not on a preset course" and continuation of the stimulus and the size of it will depend on how policy makers view upcoming economic indicators.

The Fed said the country's economy "has continued to expand at a moderate pace," with its labor market showing "some further improvement," even as the country's jobless rate remains elevated at 7.2 percent.

American employers have only been adding a modest number of workers to their payrolls in recent months, leaving more than 11 million workers unemployed.

The central bank said consumer spending, which accounts for more than two-thirds of the country's economic output, and business investment have advanced in recent weeks, but the U.S. housing market has slowed.

The Fed policy makers made no direct mention of the effect of the 16-day partial shutdown of the U.S. government earlier this month, which some economists predict will take up to $24 billion out of the U.S. economy in the last three months of the year. The government shutdown occurred as fractious lawmakers in Washington argued over spending priorities and increasing the country's borrowing authority. Eventually, Congress agreed to reopen the government and set new deadlines early next year to try to settle the dispute.

The Fed said that it sees "underlying strength in the broader economy," after taking into account reduced national government spending in the last year.