FED PERKS UP (A BIT)

The Federal Reserve brightened its outlook on the economy Wednesday and maintained its pledge to keep rates low until mid 2013.

The Federal Reserve brightened its outlook on the economy Wednesday and maintained its pledge to keep rates low until mid 2013.

NEW YORK (CNNMoney) — The Federal Reserve issued a slightly better outlook on the economy Wednesday, and made no additional moves to stimulate growth.

Following a two-day policy meeting, the central bank voted 9-to-1 to make no changes to the Fed’s ongoing stimulus program, and maintain its pledge to keep interest rates at record lows “at least through mid-2013.” The Fed has held rates near zero since December 2008.

But the Fed did say “economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year.”

The Fed also noted household spending has increased at a faster pace recently, as business investment has also expanded. The housing market continues to be a drag though, and risks to economic growth, including strains in global financial markets, still persist.

Read the Fed statement

At its last meeting in September, the Fed launched a program known as Operation Twist, swapping $400 billion in short-term bonds for longer term securities. The program was intended to bring down long-term interest rates, making it cheaper for businesses, consumers and potential homebuyers to secure cheap loans.

By coupling that plan with investments in mortgage-backed securities, the Fed has also been targeting the housing market specifically, by trying to bring down record-low mortgage rates even further and giving homeowners an incentive to refinance their existing mortgages.

The effects of those ongoing programs have yet to be fully realized, but already some Federal Reserve officials have been making a case for more stimulus.

Last month, Fed Governor Daniel Tarullo and New York Fed President William Dudley both called for more efforts to prop up the housing market.

Janet Yellen, second in command to Fed chairman Ben Bernanke, said another round of asset purchases could be necessary to boost U.S. economic growth. And Chicago Fed President Charles Evans has been pushing for the central bank to do more to fix the jobs crisis.

While the Fed decided not to act on any of those ideas in their latest meeting, all that campaigning has outsiders wondering if the central bank could be preparing to act at its upcoming meeting in December.

Evans dissented against the Fed’s decision Wednesday, because he would have preferred the central bank take additional action. He was the only Fed member to formally dissent.

Bernanke is scheduled to speak at a press conference at 2:15 p.m. ET, explaining the Fed’s latest decision in greater detail.

At that time, the Fed will also release its revised projections for the unemployment rate, inflation and overall economic growth.

The Fed previously released its forecasts in June, predicting that the U.S. economy would grow 2.7% to 2.9% this year, but given weak growth so far, that now seems very unlikely.

The economy would have to grow at a whopping 6.6% annual rate in the fourth quarter alone, to meet even the low end of that forecast. It grew at only a 2.5% rate in the third quarter. To top of page

Article source: http://rss.cnn.com/~r/rss/money_topstories/~3/AXvFkZcZH9A/index.htm

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