Fed Not Changing Policies

Steven Bobson, Europe & Americas Editor
April 28, 2011 /

The US Federal Reserve released it’s scheduled policy statement on Wednesday, April 27, 2011 and showed no change in monetary policy.

The Fed said that it will continue with quantitative easing, its monetary stimulus policy and with the second round of its purchases, which are expected to total $600 billion by the end of June this year.

Federal Reserve Chairman Ben Bernanke said that its monetary stimulus policy is likely not to have a significant impact on the financial markets and the economy.

On the same day, the Fed also released its economic forecast for economic growth, unemployment and inflation.

Bernanke said that their perceived economic growth for 2011 was cut off from 3.4 percent to 3.9 percent to 3.1 percent to 3.3 percent. The annual growth is expected to be lower at 2 percent, largely because of a weak first quarter growth and lower defence spending, weaker exports, weak construction sector and bad weather.

The factors are deemed to be only transitory except for construction. The Fed’s longer-term growth projection is still unchanged at 2.5 percent to 2.8 percent.

The Fed also lowered its expected unemployment rate from 8.8 percent to 9 percent to 8.4 percent to 8.7 percent.

But it raised its inflation forecast from 1.3 percent to 1.7 percent to 2.1 percent to 2.8 percent. High commodity prices are expected to push it but the Fed is confident that inflation will remain stable.

In addition to the forecasts, the Fed also hinted that they will not pump more money in the economy until June and that it will keep interest rates low for an extended period.

The Fed’s press conference was part of the the Fed’s wider move to become more transparent with its decisions and way of handling the financial crisis.

 

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