The US Federal Reserve left interest rates unchanged and reaffirmed its pledge to maintain its massive stimulus program amid further signs of a split in the central bank's committee and speculation that chairman Ben Bernanke is preparing to step down.
After a two-day meeting of the Federal Open Market Committee, the Fed concluded that the possibility that the US economic recovery would slip into reverse, taking the jobs market with it, had "diminished since the fall."
"Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth," said the Fed.
Against this backdrop, the Fed said it would continue to pump $85bn into the economy, buying $40bn of mortgage-backed securities and $45bn in Treasury bonds in an attempt to keep interest rates at rock-bottom levels and encourage investment.
Bernanke recently suggested that the Fed could taper off the bond-buying programme, known as quantitative easing (QE).
That suggestion shook investors. US stock markets rose after the release of the statement. Bernanke will give further details at a press conference this afternoon. However two members of the FOMC signaled in the latest statement that they had doubts about the Fed's handling of its quantitative easing policy.
James Bullard, president of the Federal Reserve Bank of St Louis, said the committee should "signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings."
Long-time QE critic Esther George, president of the Federal Reserve Bank of Kansas City, again voiced her concern that the policy "increased the risks of future economic and financial imbalances".
Jack Ablin, chief investment officer at BMO Private bank, said the mixed messages were likely to continue as the Fed wants to keep up its stimulus program while warning that it will not last forever.
"We believe Bernanke would like to keep the pedal to the floor with stimulus in an effort to spur as much growth and employment for as long as possible.
At the same time, the Fed will continue to employ a Federal 'open mouth' policy to keep stocks and housing from rising too much further above fair value," he said in a note to investors.
At his regular press conference on Wednesday afternoon, the Fed chairman is also expected to be quizzed about when he will step down following comments by the president earlier this week.
On Monday, Barack Obama said Bernanke has stayed in his job "longer than he wanted to or he was supposed to."
In an interview with Charlie Rose on PBS, the president said Bernanke, a 59-year-old former Princeton University professor, had been "an outstanding partner" in helping the US recover "from what could have been an economic crisis of epic proportions."
Bernanke was appointed chairman by president George W Bush in February 2006. His second four-year stint at the central bank officially ends January 31. While few expected him to seek, or get, a third term the comments were seen as a clearest signal yet that his time as Fed chairman is drawing to a close.
guardian.co.uk
After a two-day meeting of the Federal Open Market Committee, the Fed concluded that the possibility that the US economic recovery would slip into reverse, taking the jobs market with it, had "diminished since the fall."
"Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth," said the Fed.
Against this backdrop, the Fed said it would continue to pump $85bn into the economy, buying $40bn of mortgage-backed securities and $45bn in Treasury bonds in an attempt to keep interest rates at rock-bottom levels and encourage investment.
Bernanke recently suggested that the Fed could taper off the bond-buying programme, known as quantitative easing (QE).
That suggestion shook investors. US stock markets rose after the release of the statement. Bernanke will give further details at a press conference this afternoon. However two members of the FOMC signaled in the latest statement that they had doubts about the Fed's handling of its quantitative easing policy.
James Bullard, president of the Federal Reserve Bank of St Louis, said the committee should "signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings."
Long-time QE critic Esther George, president of the Federal Reserve Bank of Kansas City, again voiced her concern that the policy "increased the risks of future economic and financial imbalances".
Jack Ablin, chief investment officer at BMO Private bank, said the mixed messages were likely to continue as the Fed wants to keep up its stimulus program while warning that it will not last forever.
"We believe Bernanke would like to keep the pedal to the floor with stimulus in an effort to spur as much growth and employment for as long as possible.
At the same time, the Fed will continue to employ a Federal 'open mouth' policy to keep stocks and housing from rising too much further above fair value," he said in a note to investors.
At his regular press conference on Wednesday afternoon, the Fed chairman is also expected to be quizzed about when he will step down following comments by the president earlier this week.
On Monday, Barack Obama said Bernanke has stayed in his job "longer than he wanted to or he was supposed to."
In an interview with Charlie Rose on PBS, the president said Bernanke, a 59-year-old former Princeton University professor, had been "an outstanding partner" in helping the US recover "from what could have been an economic crisis of epic proportions."
Bernanke was appointed chairman by president George W Bush in February 2006. His second four-year stint at the central bank officially ends January 31. While few expected him to seek, or get, a third term the comments were seen as a clearest signal yet that his time as Fed chairman is drawing to a close.
guardian.co.uk
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