Fed decision on pace of bond purchases is awaited
Source: AP-Excite
By MARTIN CRUTSINGER
WASHINGTON (AP) - Investors are waiting to see whether one of Ben Bernanke's final acts as chairman of the Federal Reserve will be to announce a pullback in the Fed's bond purchases. The purchases have been intended to keep long-term loan rates low to spur economic growth.
It's a close call.
But most economists think that when the Fed's latest policy meeting ends Wednesday, it will announce that it's maintaining its pace of $85 billion a month in bond purchases despite a drop in unemployment to 7 percent and other improving economic data.
One factor in the Fed's hesitance to reduce its stimulus is that inflation remains historically low. The Fed's optimal rate is 2 percent. For the 12 months ending in October, consumer inflation as measured by the Fed's preferred index is just 0.7 percent, well below its target. The Fed is as concerned about under-shooting the inflation target as over-shooting it. Both are seen as threats to the economy.
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In this Feb. 26, 2013 file photo, Federal Reserve Board Chairman Ben Bernanke testifies before the Senate Banking Committee hearing on Capitol Hill in Washington. Most economists think the Fed, after meeting this week, will maintain the pace of its monthly bond purchases to keep long-term loan rates low to spur spending and growth. (AP Photo/Carolyn Kaster, File)