With less than 2 weeks remaining for the US presidential elections to conclude, the Fed Reserve, focused on the economy, said that there is still need for its help to improve the growth and reduce unemployment rate.
All-Talks No-Actions for Now!
The Fed has not taken any action after a 2-day policy meeting as it still thinks that there is hope for improvement from its older policy. It said it wants some more time to address whether or not aggressive steps it released in last month will boost the economy.
In September, the Federals started purchasing mortgage bonds in order to push its longer-period interest rates lower, making house or property buying more affordable. It is also planning to keep its standard short-term rate close to zero by mid-2015. Federal Reserve said in a statement that the US economy is boosting steadily, but unemployment rate and job growth remains elevated.
Retail and Housing Sectors are Showing Positive Growth
Fed also said that shoppers spending have improved slightly and housing market is showing the signs of improvement. However, the improvement in business investment has reduced. It also noted that inflation has risen recently due to the higher energy and fuel prices; however, inflation over the longer period will remain mild. Its statement was largely predicted and it did not bond prices or move stock.
US’s Chief economist for High Frequency Economics, Jim O’Sullivan, said that big changes occurred in Sept and with 13 days remaining for the election, officials perhaps made the meeting as much of non-event for markets as possible. President of the Fed Rev Bank ofRichmond, Jeffrey Lacker objected this meeting as he thinks that Federal policy will lead to higher inflation. The jobless rate sank to 7.8% in Sept, the first time it has been below 8% since Jan 2009. However, the economy growth can boost job growth.
Last Quarter Results Were Fairly Encouraging Too
The economy improved at 1.3% annual rate in the last quarter and analysts believe that the economy grew slightly higher in this quarter, i.e. from July to Sept. It will report Q3 growth on this Friday. However, many workers remain cautious of hiring due to increase in tax and spending cut set, as well as declining world economy. Fed’s bond purchases released in September are designed to reduce interest rates and cause home and stock prices to rise, forming a wealthy environment. When shoppers feel wealthier, they tend to spend more, improving the global economy. Federals will announce in Dec that it’s going to replace its current bond to buy longer term treasuries.