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Fed sticks to stimulus plan

Fed sticks to stimulus plan
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The Federal Reserve is to press ahead with its aggressive stimulus programme despite improving US economic conditions.

Wrapping up a two-day meeting, the central bank’s chief .. Ben Bernanke and fellow policy makers said they will continue large-scale purchases of government bonds – injecting 85 billion dollars a month into the economy.

With the latest flare-up in the eurozone crisis serving as a timely reminder of a risky global economic environment, the Fed said despite a return to moderate growth US unemployment remains too high and expressed concern about recent spending cuts in Washington.

“The committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labour market has improved substantially in a context of price stability,” the US central bank said.

The Fed also released a new set of economic forecasts that may surprise some market analysts, who had predicted solid recent data might lead to upgrades in policymakers’ views.

Fed officials now see growth in a range of 2.3-2.8 percent in 2013, down from 2.3-3.0 percent in its December projections.

For 2014, the Fed sees US GDP expanding 2.9-3.4 percent versus 3.0-3.5 percent in December.

In contrast, estimates for the unemployment rate, a key metric for the central bank, were slightly more benign, if still too high for most policymakers’ comfort.

The Fed now believes the jobless rate, which registered 7.7 percent in February, will average 7.3-7.5 percent in the fourth quarter of 2013, down from 7.4-7.7 percent in December.

Unemployment will not fall to 6.5 percent, the level at which central bankers have suggested they will begin to consider raising rates, until 2015, the estimates show.