Top US Federal Reserve policymakers unanimously agreed to keep crisis measures in place when they met on Wednesday, batting away fears their policies risked stoking US inflation.
A revamped Federal Open Market Committee — the Federal Reserve’s interest-rate setting panel — ended a two-day meeting with a pledge to continue a US$600-billion stimulus plan designed to jolt the US economy out of its slumber.
Despite signs of a “continuing” recovery, the Fed kept its foot on the accelerator, continuing emergency bond purchases that prime the economy and keeping interest rates at the ultra-low rate of zero to 0.25 percent.
“The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions,” members said in a statement.
Since the last Fed policy meeting last month, unemployment has dropped to 9.4 percent and most economists see a diminishing risk of a downward spiral of wages and prices.
The brighter economic picture has given voice to the central bank’s detractors, who argue it must ready itself for a return to more sustainable policies or else risk stoking inflation.
However, the Fed policymakers brushed aside those criticisms, saying price increases for some items were not representative of a larger trend.
“Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward,” it said in the statement.
The statement was given extra weight by the absence of dissent, particularly from two new members of the panel who had voiced concerns about the Fed’s policies before joining its top policy panel.
Josh Feinman, global chief economist for DB Advisors — a part of Deutsche Bank — said the statement showed the Fed is sticking to its guns despite the risks.
Michael Gapen, an economist with Barclays Capital, said the Fed’s language left the door open for further spending.
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