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Fed tries to support fragile recovery

Fed tries to support fragile recovery
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The US Federal Reserve has announced it is to buy up longer-term government debt in an effort to support the sputtering economic recovery.

It will use the proceeds from maturing mortgage bonds rather than printing new money.

In a statement at the end of its one day monthly meeting Fed Chairman Ben Bernanke’s policymakers gave a more gloomy outlook for the economy saying the recovery in output and employment “ has slowed in recent months.”

The problem for the US government is that consumer spending is petering out and manufacturing, which had led the recovery, is losing steam.

The unemployment rate is stuck at 9.5 percent, with firms reluctant to hire.

A monthly poll of leading economists concluded that total is unlikely to come down much before the end of the year because of weak demand.

Nearly 70 percent of those economists had lowered their growth forecasts in the past month, citing lower consumer spending.

And a study by Federal Reserve economists in San Francisco came to the conclusion that there is a significant chance the US economy will slip back into recession in the next two years.

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