Fed Chairman Bernanke News Conference Following FOMC Rate Decision
Pete Marovich/Bloomberg via Getty ImagesFederal Reserve Chairman Ben Bernanke.
By Alister Bull
and Pedro da Costa

WASHINGTON -- The Federal Reserve extended its support for a slowing U.S. economy Wednesday, saying it will keep buying $85 billion in bonds per month for the time being.

In announcing the widely expected decision, Fed officials nodded to a weaker growth outlook due in part to a fiscal fight in Washington that shuttered much of the government for 16 days earlier this month.

A rise in borrowing costs following hints from the central bank earlier in the year that it might soon start to ratchet back its monetary stimulus have also weighed on growth.

"Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months," the Fed's policy-setting Federal Open Market Committee said. "Fiscal policy is restraining economic growth."

The labor market has shown "some" further improvement, the Fed said, despite some recent weakening in the figures. It dropped a reference to a "tightening of financial conditions observed in recent months" from its list of risks to the outlook.

Esther George, president of the Kansas City Federal Reserve Bank, dissented against the decision as she has at every FOMC meeting this year, favoring a modest reduction in the pace of bond purchases.

The Fed shocked financial markets in last month by opting not to scale back its bond buying, after allowing a perception to harden over the summer that it was ready to start easing off on stimulus. Its caution has since been vindicated.

Consumer and business confidence has been dented by the bitter political fight that triggered the government shutdown and pushed the nation to the brink of a potentially devastating debt default, and a slew of recent data has pointed to economic weakness.

Reports Wednesday showed U.S. private-sector employers hired the fewest number of workers in six months in October, while inflation stayed under wraps last month.

Other recent data on hiring, factory output and home sales in September had already suggested the economy lost a step even before the government shut down.
Readings on consumer confidence this month have shown the fiscal standoff rattled households.

The soft tone in the data has led markets to recalibrate forecasts for a tapering in the bond purchases and has pushed rate hike expectations back into mid-2015 at the earliest.

Before the FOMC statement's release, futures markets indicated a 52 percent chance of the first quarter-point rate hike by April 2015; that rose to 96 percent by September 2015. Yields on the 10-year U.S. Treasury note have fallen back to 2.50 percent, compared with almost 3 percent in early September.

In response to the deepest recession and weakest recovery in generations, the U.S. central bank cut interest rates to near zero and more than quadrupled its balance sheet to $3.8 trillion.

The response hasn't been uncontroversial, with some Fed hawks and many Republicans arguing there is a risk of runaway inflation or financial market bubbles.

However, core Fed officials, including Chairman Ben Bernanke and his presumptive successor, Vice Chair Janet Yellen, have argued that the threat of persistently high unemployment is the most pressing issue right now.

Data on Wednesday showed consumer price inflation at just 1.2 percent in the year through September, well below the central bank's 2 percent target.

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November 03 2013 at 5:24 PM Report abuse rate up rate down Reply

It just kilsl me that I have to tighten my belt and the Fed can't tighten its belt not even a notch. How can this country grow if you don't make it work hard to get what it needs? Just amazing that the Fed can't even cut one dollar out of their spending.

October 31 2013 at 9:45 AM Report abuse +1 rate up rate down Reply

Esther George is Accurate and Correct !

Fed now owns about a quarter of the USA Economy.

All Paper Currencies FAIL................just takes time.

She should have been instead of Yellen.

October 31 2013 at 6:48 AM Report abuse +1 rate up rate down Reply

Of course inflation is low. The feds strip out the actual cost of day to day living costs, such as food and utility bills & gassing a car.

What a bunch of jokers. Do they really think that people don't know that they are paying more to buy groceries?

Harris Glasser
www.Harris Helps.org

October 30 2013 at 10:47 PM Report abuse +4 rate up rate down Reply

The more they print, the less what we have is worth. FIRE THE FED

October 30 2013 at 10:01 PM Report abuse rate up rate down Reply

At this point, they no longer have a choice. Either print billions or watch the market crash like never before. We'r screwed. It was all planned.

October 30 2013 at 7:57 PM Report abuse +2 rate up rate down Reply

If you are not happy with the feds printing they money you must remember that the present federal reserve chairman is a bush jr. appointee whos term is coming to an end and President Obama has his choice to run the federal reserve. If you are on medicare and social security thank a democrat, if you want to end these 2 fine programs vote republican.

October 30 2013 at 4:55 PM Report abuse -4 rate up rate down Reply
3 replies to toosmart4u's comment

These doomcryers keep repating the same LIE. The Treasury gets about $2 BILLION/month in revenues, More than enough to entirely service bond indebtedness.

October 30 2013 at 4:40 PM Report abuse -1 rate up rate down Reply

As long as the presses can roll green. Oops the pres. is speaking got to go listen to the bul.

October 30 2013 at 4:04 PM Report abuse +1 rate up rate down Reply

am getting disgusted with this liberal, no progressive, approach to
resolving the economic issues of this country. capitalism and free
enterprise is what this country is all about. for the fed to now be feed-
ing 85 billion into the economy monthly makes no sense. we cannot
print our way out of this mess. we are simply devaluing our wealth as
as nation. but, guess what, this is what the grand obama plan is!

October 30 2013 at 3:57 PM Report abuse +3 rate up rate down Reply