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Fed says US economy weaker, but no policy change

Fed says US economy weaker, but no policy change
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The Federal Reserve says the US economic recovery had lost momentum so far this year, but after their monthly meeting, the central bank’s policymakers stopped short of offering new monetary stimulus.

There was a signal in their statement that there could be further purchases of US government bond in the future but no timescale was mentioned.

Analysts believe they will wait until at least September.

Fed officials described the economy as having “decelerated somewhat,” and reiterated their disappointment with the slow pace of progress in bringing down the nation’s 8.2 percent jobless rate.

In a slight hardening of their statement in June, the Fed said: “The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed.”

As the Fed met there was some good news on the jobs front private US companies hired more workers than expected in July – but not enough to cut the unemployment rate.

Manufacturing activity contracted for a second month in a row in July, according to the Institute for Supply Management, and exports continued to tumble.

US consumer spending stagnated in June and retail sales fell for a third straight month.

Economic growth slowed to 1.5 percent in the second quarter.

Economists say all those indicators of sluggish growth mean the Fed has to do more, but exactly what and when is still unclear.

Many think Fed Chairman Ben Bernanke could use his speech at the central bank’s high-profile gathering in Jackson Hole, Wyoming, in August to send a strong message to markets. He used that forum in 2010 to communicate the Fed’s intention to pursue a second round of money printing – quantitative easing, or QE2.