Federal Reserve The Federal Reserve Tuesday kept its current accommodative monetary policy going steadily and continued its program of quantitative easing, saying the economic recovery is continuing, but the growth rate "has been insufficient to bring down unemployment."

"Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit," the Fed said in its statement. "Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed."

The Fed kept its fed funds target in the 0% to 0.25% range, unchanged for the 22nd-straight month, and it maintained the same stance or tone regarding its future interest rate policy, reiterating that it will keep rates "exceptionally low" for an "extended period. The Fed made no new asset purchases.

Regarding inflation, the Fed said, "Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward."

Thomas Hoenig Is the Lone Dissenter Again

The Fed also announced no changes to the QE2, its $600 billion, eight-month asset-buying program known as quantitative-easing. When the plan was announced at its last meeting, the Fed said it would buy up to $75 billion in assets per month.

The Fed added that the QE2 purchases will "promote a stronger pace of economic recovery" while keeping prices stable "over time."

The Fed's board vote to continue on the same course was 11-1, with Kansas City Fed President Thomas Hoenig again voting against the program, dissenting for the eighth straight Fed meeting. Hoenig has argued that the "continued high level of monetary accommodation" may eventually "destabilize the economy."

Small-Business Confidence Is Rising

The Fed's announcement had little impact on either the U.S. stock or bond markets, at least initially.

The Dow Jones Industrial Average, up about 75 points at 11,503 prior to the Fed's announcement, remained essentially the same, up about 70 points to 11,493 in the initial minutes afterward. The Dow closed up 47 points. The yield on the 10-year U.S. Treasury note, at 3.38% before the announcement, was essentially unchanged at 3.39% initially but closed at 3.46%.

The Fed's meeting took place on the heels of a November survey showing the highest confidence among small-business owners since the recession started in December 2007. The National Federation of Independent Business's optimism index increased to 93.2 in November from 91.7 in October, its highest level since December 2007.

The NFIB report is based on a survey of about 800 small business owners, who were surveyed through November 30. Small businesses -- companies employing up to 500 people -- have created about 65% of all new jobs in the past 17 years.

Still 15 Million Jobs Short

Some economists argue that the signs of a strengthening U.S. economy should be enough for the Fed to abandon its quantitative easing program. They cite the revised 2.5% third-quarter GDP growth rate, up from the initial 2% estimate, as primary evidence.

A much larger camp of economists, however, argues that the policy should continue, pointing to the nation's comparatively low GDP growth rate in the initial stage of the expansion, and the fact that the U.S. economy is short about 15 million jobs -- not counting part-time employees who want full-time work -- as ample proof that further stimulus is needed.

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sfamilyent

Where are the jobs? What actions can the Fed take to ensure there are incentives for businesses to expand operations within our borders? Or, to relocate facilities from off shore locations within our border?

December 15 2010 at 11:46 AM Report abuse rate up rate down Reply
Darrell & Donna

There is no recession for the rich;they just keep getting richer;;this is the AMERICAN way;;Thanks to the FEDS GREENSPAND AND BERNANKE;;DO AWAY WITH THE FEDS;;THE RICH CONTROL THIS WORLD;;

December 15 2010 at 8:04 AM Report abuse rate up rate down Reply
Robert & Lisa

Democrats, if Obama and the Demoncrat thugs are so much for the average Joe, why do they bail out the banks who are owned by those evil, rich people like George Soros and Warren Buffet? Seems like your party is deceiving you, don't you think?

December 15 2010 at 6:26 AM Report abuse rate up rate down Reply
1 reply to Robert & Lisa's comment
sgentilejr

Robert & Lisa6:26 AM Dec 15, 2010
Democrats, if Obama and the Demoncrat thugs are so much for the average Joe, why do they bail out the banks who are owned by those evil, rich people like George Soros and Warren Buffet? Seems like your party is deceiving you, don't you think?
___________________________________________________________________
Reply: The Bailouts were begun in Sept. 2008 by then President Bush with the Full support of Congress. Maybe you think allowing them to Fail would have been a better approach___however you are wrong. Only LOSERS like YOU want to just Throw in the Towel and give up. Almost all of the TARP money given to the banks and auto companies has been repaid and in many cases with a Profit for the government. LOSERS like you accept failure___Winners like Bush and Obama want to fight on to recover when they can provide help.

December 15 2010 at 8:22 AM Report abuse +1 rate up rate down Reply
josepht812

The government should have cut payroll taxes down to zero. That would have put the money in the peoples hands immediately. But NO the government gives billions to the big banks and unions, and we are still in the great recession. I'm a small business and I keep hearing this is the worst I've ever seen it. I have to agree.

December 14 2010 at 11:32 PM Report abuse +3 rate up rate down Reply
ultraz2

Thanks to the TARP which took the OPPORTUNITY to create this GREAT RECESSION and were then bailed out by the hard working middle class American tax payers.

December 14 2010 at 11:29 PM Report abuse +2 rate up rate down Reply
ultraz2

Oncee in January 2011, this recession will span into it's 5th calendar year and begin it's fouth 12 month term. The recession is recognized as having begun in December 2007. ------------------ 2007,2008,2009,2010,2011

December 14 2010 at 11:24 PM Report abuse +2 rate up rate down Reply
Samir semaan

While the economy rate of growth it has modest recovery due to the housing problem and foreclosures and the down on sales every month bring bad news and make the consumer want to save for the benefit of them.

December 14 2010 at 10:35 PM Report abuse +1 rate up rate down Reply
lightningdove

Oh, let's just continue to do more of the same policy that isn't working.

December 14 2010 at 8:48 PM Report abuse rate up rate down Reply
ultraz2

FED needs to stand on bankers heads to get proper co-operation to turn the USA housing market around.

December 14 2010 at 8:43 PM Report abuse +2 rate up rate down Reply
ultraz2

30 year mortgage intrest rates still too high to help the crippled housing market.

December 14 2010 at 8:42 PM Report abuse +2 rate up rate down Reply