The US Federal Reserve said on Tuesday the US recovery was gaining traction and inflation pressure from soaring energy costs should be short-lived, allowing it to maintain its heavy support for the economy.
The US central bank decided unanimously to forge ahead with its US$600 billion bond-buying plan despite a considerably more upbeat assessment of the economy and the job market
It made no mention of Japan, which is grappling with the aftermath of the country’s worst -earthquake on record — and struggling desperately to avert a nuclear disaster.
“The economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually,” the Fed said in a post-meeting statement.
It was a much rosier outlook than the Fed had offered after its last meeting in January, when it characterized the recovery as still too weak to significantly bring down unemployment.
The statement also dropped a reference to economic progress being “disappointingly slow” and a list of roadblocks to consumer spending. In addition, it removed a passage stating that employers remained reluctant to hire.
The Fed reiterated a pledge to keep interest rates, currently near zero, at very low levels for an extended period. That puts it at odds with other prominent monetary authorities like the European Central Bank, which has signaled a rate hike could come next month.
The Fed dedicated an unusually large portion of its statement to inflation concerns surrounding a recent spike in energy and food prices. It said it would monitor inflation and expectations for future prices closely, but added that the situation appears to be under control.
“Long-term inflation expectations have remained stable, and measures of underlying inflation have been subdued,” it said.
Higher gasoline costs have created fresh concerns for consumers, with a big hit to confidence this month raising concerns whether a recent spurt in consumer spending can be sustained.