RISMEDIA, January 28, 2011—(MCT)—Federal Reserve policymakers kept interest rates close to zero and pledged to charge ahead with their controversial bond purchases to stimulate the economy, despite some new voting members at the Fed who have previously raised concerns about the Treasury bond-buying program.
Fed officials, in their first monetary policy-setting meeting of the year, said the economic recovery was continuing and noted the pick-up in consumer spending late last year after the best holiday sales in several years. But overall, the tone of the central bank’s outlook was cautious, especially in regard to employment.
“Employers remain reluctant to add to payrolls,” they said, as in past statements.
As expected, policymakers stuck with their policy—now more than two years old—of holding short-term interest rates at rock-bottom, and they reiterated that’s where it would stay for “an extended period.” Also, the Fed reaffirmed its commitment to buy $600 billion of long-term Treasury securities by the end of June. The program was launched in November and is aimed at pushing down long-term interest rates to free up more money for borrowing and spending, but it has been criticized as lacking potency and creating risks of higher inflation down the road.
The Fed statement acknowledged the recent rise in prices of commodities such as oil, grains and rubber—an increase that has stoked inflationary pressures in emerging economies. Even so, Fed officials indicated that it has not had much effect in the U.S., where “measures of underlying inflation have been trending downward.”
The Fed’s policy-setting group began the year with four new voting members, three of whom are considered to be more “hawkish” in their attitude toward inflation. The change in makeup of the currently 11 voting members of the committee had raised speculation of increasing dissent as the central bank delicately balances the need to boost employment while remaining a bulwark against inflation. The policy statement, however, was approved unanimously.
(c) 2011, Tribune Co.
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