Fed's cheap money policy expected to continue
Top Federal Reserve officials in charge of setting the nation’s monetary policy are expected to continue offering banks at record low interest rates, when they finish their last scheduled meeting of the year Wednesday.
In a statement due to be released tomorrow at 2:15, the selected group of officials, known as the Federal Open Market Committee, will issue their assessment of the economy and say what if any policies will change as a result of new economic data released since their last meeting ended on November 4.
In the previously released statement, the FOMC had noted continuing economic improvement.
However the committee noted that consumer spending, the key driver of economic activity in the U.S., was constrained in part by ongoing job losses.
In federal government’s monthly employment report for November, which was released on December 4, the unemployment rate fell to 10.0 percent, with 11,000 jobs lost for the month.
The result was a big surprise as economists’ consensus was for a much higher number of at least 130,000 job cuts.
In November, the Fed said it expected subdue inflation for “some time.”
The Fed concluded in the November meeting that it would keep its key interest rate at record lows of between 0 and ¼ of a percentage point. The federal funds rate is the rate at which depository institutions, mostly banks, lend to each other overnight. Officials said the rate was likely to remain low for an extended period.
In addition to the rate, the Fed is also approaching the first quarter of 2010, when it said it would end its $1.25 trillion purchase of mortgage-backed securities and about $175 billion of agency debt.
The Fed may choose to hasten, delay, or keep that schedule depending on its interpretation of the previous month’s economic activity.
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