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Fed extends stimulus to boost economy

Fed extends stimulus to boost economy
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The weak US recovery and growing financial problems in Europe mean the Federal Reserve has extended its monetary stimulus.

At their monthly meeting the US central bank policymakers said they will renew efforts to bring down borrowing costs by selling short-term government bonds to buy those maturing at a later date.

Central banks worldwide are seeking ways to stimulate their weak economies.

With its benchmark interest rate already cut to between zero and a quarter of a percent, the Fed has little room for manoeuvre in the face of yet another slowdown.

Analyst Jim Bianco listed the problems facing the US: “There is a protracted slowdown in the economy and it’s unmistakable right now, especially with the downward revisions that we saw in the previous numbers, and that they are all going to have to go back and rework their assumptions about a potential slowdown in the economy coming, for the third summer in a row now, as we’ve seen before.”

In its statement after the meeting the Fed said the US economy is “expanding moderately,” but conceded employment growth has slowed and would come down “only slowly.”

In May only 69,000 new jobs were created and the unemployment rate rose to 8.2 percent

The bank expressed worries about weaker consumer spending saying it “appears to be rising at a somewhat slower pace than earlier in the year,” but said inflation “has declined” mainly because of lower oil prices and its longer-term inflation expectations remain stable.