The Federal Reserve today offered investors a glimmer of hope that the worst economic crisis since the Great Depression may be coming to an end. But it's hardly time to pop the champagne corks.

Data received by the Fed since the April meeting of the Federal Open Market Committee shows that the pace of economic contraction is slowing, according to an FOMC statement. That jives with data collected from other sources including the housing sector which is showing signs of improvement.

"Conditions in financial markets have generally improved in recent months," the statement said. "Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. "

Investors shrugged their shoulders at the Fed's statement, which contained few surprises. The Dow Jones industrial average and the S&P 500 were little changed after initially plunging. The dollar had its biggest drop in six weeks.

Fed officials, which maintained its $1.75 billion bond purchase program, said inflation was subdued. Total assets on the central bank's balance sheet grew to $2.07 trillion as the Fed loaned to banks, commercial paper issuers, and purchased bonds outright to support the flow of credit to consumers and businesses, according to Bloomberg News.

The Fed found yet again that businesses are slashing fixed investment and staffing though they appear to be making progress in bringing inventory stocks into better alignment with sales. Prices for energy and other commodities have risen of late.The statement reiterated that "economic activity to remain weak for a time."

As expected, the committee will maintain the target range for the federal funds rate at 0 to 0.25 percent. The FOMC expects that economic conditions will result in "exceptionally low levels" of the federal funds rate for an extended period, the statement said.

"However, substantial resource slack is likely to dampen cost pressures, and the committee expects that inflation will remain subdued for some time," according to the statement.


Increase your money and finance knowledge from home

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

Add a Comment

*0 / 3000 Character Maximum