Fed expects U.S. economy to gain momentum in near term

08:19, January 05, 2011      

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The U.S. Federal Reserve said on Tuesday that it expected the U.S. economy to pick up momentum in the near term, but the central bank's outlook for the economic activity over the medium term was little changed.

Central bank officials held that with the recent strong production and spending data, the staff revised up its projected increase in real gross domestic product (GDP) in the near term. However, the staff's outlook for real economic activity over the medium term remained nearly the same.

"Economic activity was increasing at a moderate rate, but that the unemployment rate remained elevated. The pace of consumer spending picked up in October and November, exports rose rapidly in October, and the recovery in business spending on equipment and software appeared to be continuing," the Fed noted in the minutes released on Tuesday of a Federal Open Market Committee (FOMC) meeting held in December 2010.

Members of the FOMC, the interest rate policy making body of the central bank, predicted at their November monetary policy meeting that the U.S. economy would expand by 3 percent to 3.6 percent in 2011, down sharply from the previous forecast of 3.5 percent to 4.2 percent.

The central bank pointed out that a number of less favorable factors would weigh on the U.S. economic growth, including the depressed housing market and employers' continued reluctance to add to payrolls.

The Fed also decided to maintain the target range for the federal funds rate at the historically low level of zero to 0.25 percent to bolster the economic growth.

The Fed announced in the Tuesday minutes it would maintain the pace of its 600 billion dollars Treasury bond-buying program in a bid to strengthen the economic recovery and tackle the high unemployment challenge.

"While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program, and some noted that more time was needed to accumulate information on the economy before considering any adjustment," according to the 10- page minutes.

On Nov. 3, 2010, the Fed announced its plan to buy 600 billion dollars of government longer term bonds to foster maximum employment and price stability, which had invited strong criticism both at home and abroad.

The next FOMC meeting was scheduled to take place on Jan. 25 and 26.

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