Federal Reserve policy makers maintained plans to buy US$600 billion ($775 billion) of Treasuries through to June, indicating the recovery still needs stimulus to produce a bigger reduction in unemployment.
The expansion is "continuing, though at a rate that has been insufficient to bring about a significant improvement in labour market conditions", the Federal Open Market Committee said yesterday.
Stocks rose, sending the Dow Jones Industrial Average above 12,000 for the first time since June 2008, as diminished odds of an early withdrawal of stimulus boosted the prospects for growth.
Fed Chairman Ben Bernanke, while acknowledging signs of improved consumer demand, is focusing on weaknesses in the economy as he sticks to a programme that has prompted a backlash from Republican leaders in Congress. "Growth in household spending picked up late last year, but is constrained by high unemployment, modest income growth, lower housing wealth, and tight credit," the committee said.
"I don't think they will discontinue QE2," said Ward McCarthy, chief financial economist at Jefferies & Co, referring to the second round of quantitative easing.
Inflation is too low, and unemployment too high, to be consistent in the long run with policy makers' congressional mandates for stable prices and full employment, the Fed said. The Fed left its benchmark interest rate in a range of zero to 0.25 per cent, where it's been since December 2008, and pledged to keep it "exceptionally low" for an "extended period".
Employers added 103,000 workers to payrolls last month, fewer than forecast by economists. The unemployment rate fell to 9.4 per cent from 9.8 per cent.
- BLOOMBERG
Federal Reserve to pump $775b more into US economy as recovery stutters
Photo / Thinkstock
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