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US Fed sees risks from Europe crisis

The US Federal Reserve on Tuesday warned that turmoil in Europe presents a big risk to the US economy, leaving the door open to possible further steps to boost growth even though it noted a somewhat stronger labor market.

business Updated: Dec 14, 2011 22:10 IST

The US Federal Reserve on Tuesday warned that turmoil in Europe presents a big risk to the US economy, leaving the door open to possible further steps to boost growth even though it noted a somewhat stronger labor market.

The central bank said the US economy was “expanding moderately” despite an apparent slowing in the world economy. But while there had been “some” improvement in the job market, unemployment remained elevated and housing depressed.

“Strains in global financial markets continue to pose significant downside risks to the economic outlook,” the Fed said.

Some investors had speculated that the Fed might show more urgency about moving ahead with new measures to help the economy.

US stock prices fell, while prices for government debt rose.

The Fed’s statement was little changed from the one made after its last meeting in early November, although the US central bank pinned uncertainty for the US economy more squarely on events in Europe.

Most economists have said the Fed’s next meeting on January 24-25 would be the more likely occasion for any new moves to add to the US central bank’s push to bring down borrowing costs and help growth.

“They are certainly ready to lean against the wind should the economy falter,” said Cary Leahey, managing director at Decision Economics in New York.

The Fed offered no new guidance on the changing way it communicates its policies to financial markets; Fed chairman Ben Bernanke has made increased transparency a hallmark of his six years in charge of the central bank.