[h=3]By Staff and wire reports[/h]Updated
WASHINGTON – The Federal Reserve said Wednesday that the economy is losing strength and repeated a pledge to take further steps to stimulate growth if the job market doesn't show sustained improvement.
The Federal Reserve building in Washington, D.C.
But the Fed took no new action after its two-day policy meeting. It acknowledged in a statement released after the meeting that economic activity had slowed the first half of the year, unemployment remains elevated and consumer spending has weakened.
The statement was nearly identical to the one issued after the Fed's June meeting, expect for language noting slower growth. The Fed repeated that strains in the global market pose a significant risk to the U.S. economy, the housing market is improving but remains depressed and inflation remains tame.
Most economists say the Fed could launch another bond-buying program at its September meeting if the economy doesn't show improvement. The goal of the program would be to drive down long-term interest rates and encourage more borrowing and spending.
The statement was approved on an 11-1 vote. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, dissented for a fifth time this year.
Investors had hoped the Fed would announce more bond purchases, known as quantitative easing. But many economists expected the Fed to hold off to wait and see if job growth and consumer spending to pick up.
U.S. growth slowed to an annual rate of just 1.5% from April through June, down from the 2% pace in the first quarter. And consumers spent no more in June than they did in May, even though their income grew by 0.5%.
Fed officials have signaled their concern about weakening job growth and consumer spending, which have brought the economy closer to a standstill. And Chairman Ben Bernanke has said the Fed is prepared to take further action if unemployment stays high.
"Bernanke has been really straightforward. He has said if the recovery loses momentum and labor market conditions are not improving, we will get more easing," said David Jones, chief economist at DMJ Advisors.
The meeting is only one of three big events this week that investors and economists will pay close attention to. The European Central Bank meets Thursday, and the U.S. Labor Department releases its July jobs report on Friday.
Economists expect that U.S. employers added 100,000 jobs in July. That would be only slightly better than the 75,000 a month from April through June and still down from a healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2%.
The Fed has already pursued two rounds of purchases of Treasury bonds and mortgage-backed securities to keep rates low and boost the economy.
The Fed has also extended a program called Operation Twist. Under this program, the Fed sells short-term Treasurys and buys longer-term Treasurys. The goal is to lower longer-term interest rates.
The yield on the benchmark 10-year Treasury note is already just above its record low of 1.39%, which it touched last week. The national average rate for a new-car loan barely tops 3%. And the average on a 30-year fixed-rate mortgage fell below 3.5% last week for the first time on records dating back 60 years.
Some regional Fed bank presidents have expressed concern that buying more bonds and expanding the Fed's investment portfolio beyond its current record $2.9 trillion to try to lower rates more would heighten the risk of high inflation later.
Contributing: Associated Press
For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to [email protected]. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.
USA TODAY is now using Facebook Comments on our stories and blog posts to provide an enhanced user experience. To post a comment, log into Facebook and then "Add" your comment. To report spam or abuse, click the "X" in the upper right corner of the comment box. To find out more, read the FAQ and Conversation Guidelines.
WASHINGTON – The Federal Reserve said Wednesday that the economy is losing strength and repeated a pledge to take further steps to stimulate growth if the job market doesn't show sustained improvement.
By Karen Bleier, AFP/Getty Images
The Federal Reserve building in Washington, D.C.
The Federal Reserve building in Washington, D.C.
But the Fed took no new action after its two-day policy meeting. It acknowledged in a statement released after the meeting that economic activity had slowed the first half of the year, unemployment remains elevated and consumer spending has weakened.
The statement was nearly identical to the one issued after the Fed's June meeting, expect for language noting slower growth. The Fed repeated that strains in the global market pose a significant risk to the U.S. economy, the housing market is improving but remains depressed and inflation remains tame.
- [h=3]MORE: Full text of August Fed statement[/h]
Most economists say the Fed could launch another bond-buying program at its September meeting if the economy doesn't show improvement. The goal of the program would be to drive down long-term interest rates and encourage more borrowing and spending.
The statement was approved on an 11-1 vote. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, dissented for a fifth time this year.
Investors had hoped the Fed would announce more bond purchases, known as quantitative easing. But many economists expected the Fed to hold off to wait and see if job growth and consumer spending to pick up.
U.S. growth slowed to an annual rate of just 1.5% from April through June, down from the 2% pace in the first quarter. And consumers spent no more in June than they did in May, even though their income grew by 0.5%.
Fed officials have signaled their concern about weakening job growth and consumer spending, which have brought the economy closer to a standstill. And Chairman Ben Bernanke has said the Fed is prepared to take further action if unemployment stays high.
"Bernanke has been really straightforward. He has said if the recovery loses momentum and labor market conditions are not improving, we will get more easing," said David Jones, chief economist at DMJ Advisors.
The meeting is only one of three big events this week that investors and economists will pay close attention to. The European Central Bank meets Thursday, and the U.S. Labor Department releases its July jobs report on Friday.
Economists expect that U.S. employers added 100,000 jobs in July. That would be only slightly better than the 75,000 a month from April through June and still down from a healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2%.
The Fed has already pursued two rounds of purchases of Treasury bonds and mortgage-backed securities to keep rates low and boost the economy.
The Fed has also extended a program called Operation Twist. Under this program, the Fed sells short-term Treasurys and buys longer-term Treasurys. The goal is to lower longer-term interest rates.
The yield on the benchmark 10-year Treasury note is already just above its record low of 1.39%, which it touched last week. The national average rate for a new-car loan barely tops 3%. And the average on a 30-year fixed-rate mortgage fell below 3.5% last week for the first time on records dating back 60 years.
Some regional Fed bank presidents have expressed concern that buying more bonds and expanding the Fed's investment portfolio beyond its current record $2.9 trillion to try to lower rates more would heighten the risk of high inflation later.
Contributing: Associated Press
For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to [email protected]. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.
USA TODAY is now using Facebook Comments on our stories and blog posts to provide an enhanced user experience. To post a comment, log into Facebook and then "Add" your comment. To report spam or abuse, click the "X" in the upper right corner of the comment box. To find out more, read the FAQ and Conversation Guidelines.