Fed: No more QE just yet

Tim Wallace
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MODEST economic growth means interest rates will be held at “exceptionally low levels” until at least mid-2013, the Federal Open Markets Committee (FOMC) said yesterday as it decided to hold steady with its current monetary stance.

Strains in financial markets pose “significant downside risks” to the economic outlook, the Committee warned, whilst it worried that “unemployment remains elevated” and investment is increasing only slowly.

The Fed expects inflation to settle at or below two per cent, which could potentially open the way to a third round of quantitative easing (QE3) next year.

However, the statement was tight-lipped, only repeating November’s assurances that the FOMC would “continue to assess the economic outlook” and “is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.”