Fed's outlook for US economy rattles markets

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Fed's outlook for US economy rattles markets

Fed's outlook for US economy rattles markets
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World stocks fell to a new one-year low on Thursday, battered by fears of slowing global economic growth.

That came after the Federal Reserve unveiled its latest efforts to boost the faltering recovery saying it had to act because there were “significant downside risks” to the US economy.

To promote stronger growth the US central bank will try to push down long-term borrowing costs.

Fed chairman Ben Bernanke and his fellow policymakers will do that by selling short-term government bonds and buying 400 billion dollars worth of longer-term bonds between now and next summer.

The move will anger Republican politicians who believe such “intervention” will hurt the US economy.

Faced with an unemployment rate of 9.1 percent as well as weak consumer and business confidence Fed officials have been signalling in recent weeks that they would move to prevent already sluggish US growth from weakening further.

The world’s largest economy grew at a less than one percent annual rate during the first half of the year and analysts have warned of a heightened risk of recession.

Investors were also worried by the fact that the latest business survey in China showed the factory sector shrank for the third consecutive month in September, pointing to a slowdown in the world’s second-largest economy.

Business activity in Germany also grew at its weakest pace in more than two years in September and new orders fell for a
third month.