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Central Bank Says US Economy Expanding 'Moderately'

Women and girls carry purchases on the Third Street Promenade in Santa Monica, Calif., April 24, 2012.
Women and girls carry purchases on the Third Street Promenade in Santa Monica, Calif., April 24, 2012.

The U.S. central bank says the American economy is growing "moderately" and that the country's high unemployment rate could fall below 8 percent late this year.

After a two-day meeting of its chief policy makers in Washington, the Federal Reserve refrained Wednesday from adopting new stimulus measures to boost the economic fortunes for the world's largest economy. The bank said it expects that economic growth will "remain moderate" over the coming months and then "pick up gradually."

The central bank said it is keeping its benchmark lending rate at the historically low level of zero to a quarter of a percentage point, and it expects to maintain the same interest rate at least through late 2014.

The bank said the country's labor market has improved, even though the jobless rate, 8.2 percent in March, remains high. But Federal Reserve Chairman Ben Bernanke said at a news conference that policy makers now think that as the economy improves, the jobless rate could fall to a range of 7.8 to 8 percent late this year and improve even more in the next two years.

"Looking ahead, the committee anticipates the unemployment rate will decline gradually over the next several years, reflecting the moderate pace of economic growth. Specifically, [the policy makers'] projections for the unemployment rate in the fourth quarter of this year have a central tendency of 7.8 to 8 percent, declining to 6.7 to 7.4 percent in the fourth quarter of 2014," said Bernanke.

Bernanke also said that if the U.S. economy should falter, the Federal Reserve will not hesitate to take new action to boost it, as it has the last couple years.

"So we have been very accommodative. And we remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target. So in particular, we'll continue to assess, you know looking at the economic outlook, looking at the risks, whether or not unemployment is making sufficient progress towards its longer-run, normal level and whether inflation is remaining close to target," said Bernanke. "And if appropriate, and depending also on assessment of the costs and risks of additional policy action, we remain entirely prepared to take additional balancing actions if necessary to achieve our objectives."

Bernanke said consumer spending and business investment have grown, but the bank described the country's housing market as "depressed."

The central bank said that overall inflation expectations "have remained stable," at about 2 percent, and that increased energy costs will have only a temporary effect.

In recent weeks, there have been mixed signals about the American economy, with some pointing to modest growth and better times, and others emphasizing how sluggish the recovery has been from the recession that engulfed the country in 2008 and 2009.

Nearly 13 million American workers remain unemployed, with many of them jobless for extended periods. The jobless rate has fallen in recent months, but is considerably above the 5 percent level that is more normal in the U.S.

Still, many U.S. corporations have reported sharply higher profits. The world's most valuable company, U.S.-based technology giant Apple, said Tuesday its quarterly profits almost doubled during the first three months of the year. This was attributed largely to continued demand for the company's popular iPhones.  

The state of the U.S. economy is the prime issue in the presidential election campaign, heading to the November contest.

The presumptive Republican nominee, one-time venture capitalist Mitt Romney, has called for less government regulation and lower taxes to sharply boost the economy. He said that President Barack Obama, a Democrat, deserves no credit for recent gains in the economy and that any advances have occurred despite, not because of, his policies.

Obama frequently has told supporters that the economy is improving, although not as fast as he would like. He has noted that the country's businesses have filled more than 600,000 new jobs since the first of the year. He says the country cannot afford to weaken government controls designed to curb corporate excesses that contributed to the economic downturn, the worst in the United States in seven decades.

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