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The Fed Introduced New Measures to Stimulate Economic Growth By Lanbo Jiang

  in Business | Published 2011-12-05 07:37:28 | 140 Reads | Unrated

Summary

As the US

Full Content

As the U.S. economic recovery is slowing in recent months, decided to continue to maintain the federal funds rate range unchanged, and that, when necessary, take further measures to stimulate economic recovery.

Further relaxation of monetary policy the Fed may keep

The Fed decided to keep the federal funds rate at zero to the historical low of 0.25% unchanged. The Fed believes that because of the high unemployment rate, household wealth and the credit crunch and other factors, the slow growth of U.S. household consumption expenditure, business will increase the em
ployee is not strong, business equipment and software investment has slowed down, new home starts in recession, banks credit continues to shrink.

The Fed also decided the same day, in order to provide impetus to economic recovery, will continue to buy government bonds strategy. Federal Reserve monetary policy in July, said after the regular meeting will be to maintain the current balance sheet size of the bond holders, that is due the agency mortgage-backed securities and agency debt and reinvest the principal, for the purchase of long-term bonds.

In recent months, the United States to maintain modest growth in the overall price level. U.S. Labor Department figures released last week, excluding energy and food, the core consumer price index for August was flat with the previous month. Over the past 12 months, the U.S. core consumer price index rose only 0.9% for the smallest increase since 1966. Fed statement on the day of the inflation rate is too low, said the recent unrest. Some economists believe that deflation risks are rising.

The Fed said that if necessary, will take further measures to stimulate economic growth and inflation rate rose to an appropriate level. The ideal rate of inflation the Fed should be in between 1.5% to 2%.

The basic attitude of the Federal Reserve that day in line with market expectations. Standard Chartered Bank in New York economists Dai Weise Clemens said in an interview: "The Fed's statement today on the policy direction and not much changed before, but also to take further quantitative easing policy of leaving the door open."

In response to financial crisis and economic recession, the Federal Reserve from cutting interest rates began in September 2007, the interest rate from 5.25% to zero the end of 2008 to 0.25%, since interest rates remained at the historically low levels.

"Growth momentum failure" problem to be solved

Many analysts have pointed out that the U.S. economy is currently in the "growth momentum failure" embarrassing period. On the one hand, the existing government policy to stimulate the U.S. economy has not yet reached the Federal Reserve must take the point of a new quantitative easing policy; and on the other hand, the kinetic energy of fiscal stimulus is gradually fading, government spending on economic growth are the driving role weakened, the private sector to increase the confidence of employees downturn, high unemployment as the short term is difficult to cure ills.

Semmens is expected, if continued weakness in the U.S. economy, the Fed may be in the fourth quarter or early next year to adopt new interventions.

Li, scoundrel, chief economist at Standard Chartered Bank think that the current U.S. economy is still weak, the United States the economic recovery is associated with a debt repayment and economic restructuring, the weak level of growth below potential recovery. Standard Chartered Bank expects U.S. economic growth this year, only 2.5%. The Fed is expected later this year will re-use of quantitative easing.

Headquartered in Paris, France, Organization for Economic Cooperation and Development (OECD) released a report 20 in New York said that while the U.S. economy has entered a rising channel, the unemployment rate has stabilized, but the strength of the recovery is not strong enough in the short-term economic growth significant improvement in the employment market. The group expects the U.S. economy grew by only 2.6% this year, while the unemployment rate in 2013 at the earliest to return to pre-crisis levels.

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