Federal Reserve Holds Fast to Stimulus Programs

Federal Reserve policymakers voted to make no changes to the central bank’s ongoing stimulus programs in a meeting on Tuesday, after which it announced a more upbeat outlook for the job market and the global economy.

The central bank reiterated its intention to keep the federal funds rate at record lows “at least through late 2014.” The Fed has held interest rates near zero since December 2008. Meanwhile, Operation Twist also remains in place. Once complete, the program will have shifted $400 billion from short-term to long-term bonds, hopefully bringing down long-term interest rates on everything from car loans to mortgages as a result.

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But despite the Fed’s inaction, forecasters are still counting on sluggish economic growth this year. Policymakers did acknowledge that “labor market conditions have improved further” but the national unemployment rate “remains elevated.” Neither should come as much surprise after the Department of Labor reported on Friday that employers have been adding at least 200,000 jobs a month since December.

If strong growth continues, Fed watchers are wondering whether the central bank will change its game plan for the recovery, but they can only hypothesize, as Fed Chairman Ben Bernanke has remained tight-lipped on that front. However, he recently pointed out that economic data has been giving off conflicting signals, as gross domestic product continues to come in weak and the housing market remains depressed despite indicators that the job market is improving. Europe’s ongoing debt crisis and rising oil and gas prices also pose risks to consumer spending and inflation.

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