US Fed keeps stimulus as economy shrinks a tad

  • Reuters, Washington
  • |
  • Updated: Jan 31, 2013 23:34 IST

The Federal Reserve on Wednesday left in place its monthly $85 billion bond-buying stimulus plan, arguing support was needed to lower unemployment even as it indicated a recent stall in US economic growth was likely temporary.

A report on Wednesday show-ed the economy contracted in the fourth quarter as inventory investment slowed and government spending plunged. Analysts said superstorm Sandy, which slammed into a large swath of the US East Coast in late October, also disrupted the recovery.

The US central bank repeated a pledge to keep purchasing securities until the outlook for employment “improves substantially.”

A report on Friday is expected to show the US jobless rate remained stuck at 7.8% for a third straight month in January. The Fed repeated that it would keep overnight rates near zero until unemployment rate hits 6.5%, as long as inflation does not threaten to exceed 2.5%.

 

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