Fed eases economic fears

US central bank holds rates steady and says economy is moving forwards, but slowly.

    The sell-off of US stocks last month added to worries that consumers may stop spending [AP]

    "Recent indicators have been mixed and the adjustment in the housing sector is ongoing," a statement from the Fed said.

     

    "Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters."

     

    Prices for US stocks and government bonds rose but the dollar fell as traders in financial markets predicted possible interest rate cuts later in the year.

     

    "The committee's predominant policy concern remains the risk that inflation will fail to moderate as expected," the Fed statement said.

     

    At its previous meeting in January, the central bank had said growth was looking "somewhat firmer".

     

    Since then, however, a rise in mortgage defaults has raised concerns that it might become more difficult for households and businesses to borrow.

     

    Little reassurance

     

    There has been little to support the view that housing markets have stablised, as the Fed had said.

     

    A report three weeks ago showed that sales of new homes fell almost 17 per cent in January, the largest slide in 13 years.

     

    A sharp sell-off of US stocks last month added to worries that consumers, already suffering from stagnating home prices, may stop spending, putting an additional burden on the economy.

     

    Despite evidence of weaker growth, there has been little reassurance that inflation was moderating as the central bank had hoped.

     

    The 12-month change in the personal consumption expenditure price index, which is the inflation measure preferred by Fed policy-makers, moved up to 2.3 per cent in January from 2.2 per cent in December, one to two per cent above what many officials are comfortable with.

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    How different voting systems work around the world

    How different voting systems work around the world

    Nearly two billion voters in 52 countries around the world will head to the polls this year to elect their leaders.

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    The great plunder: Nepal's stolen treasures

    The great plunder: Nepal's stolen treasures

    How the art world's hunger for ancient artefacts is destroying a centuries-old culture. A journey across the Himalayas.