By The Associated Press
WASHINGTON (AP) — The Federal Reserve has decided against reducing its stimulus for the U.S. economy, saying it will continue to buy $85 billion a month in bonds because it thinks the economy still needs the support.
The Fed said in a statement Wednesday that it held off on tapering because it wants to see more conclusive evidence that the recovery will be sustained.
Stocks spiked after the Fed released the statement at the end of its two-day policy meeting.
In the statement, the Fed says that the economy is growing moderately and that some indicators of labor market conditions have shown improvement. But it noted that rising mortgage rates and government spending cuts are restraining growth.
The bond purchases are intended to keep long-term loan rates low to spur borrowing and spending.
The Fed also repeated that it plans to keep its key short-term interest rate near zero at least until unemployment falls to 6.5 percent, down from 7.3 percent last month. In the Fed’s most recent forecast, unemployment could reach that level as soon as late 2014.
Many thought the Fed would scale back its purchases. But interest rates have jumped since May, when Fed Chairman Ben Bernanke first said the Fed might slow its bond buys later this year. But Bernanke cautioned that the reduction would hinge on the economy showing continued improvement.
Copyright © 1988–2014 North Bay Business Journal
View the policy for linking to website content.