Fed holds off on new steps to help U.S. economy
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Fed holds off on new steps to help U.S. economy
Jeremy Hobson: The Federal Reserve won’t be taking any major new steps to help the economy at this time. That’s the takeaway from the Fed’s two day meeting which ended yesterday. And the reason is that the Fed expects the U.S. economy to grow at about 3 percent this year, a slight improvement from earlier forecasts.
Marketplace’s Nancy Marshall-Genzer joins us live now, from Washington with more. Good morning.
Nancy Marshall-Genzer: Good morning Jeremy.
Hobson: So, the Fed’s going to hold steady, for now?
Marshall-Genzer: Yeah, for now. The Fed says it’s committed to its current policies; and basically, Jeremy, the Fed is saving its powder for a real change in the economy — whatever that might be.
Karen Petrou is a managing partner with Federal Financial Analytics and she says doing nothing is actually strategy in itself.
Karen Petrou: The Fed could over react and they’re right to be careful. And that’s certainly what Chairman Bernanke said, is we’re not going to do more than we have but if we have to, we will.
And Jeremy, one reason the Fed is doing nothing is the U.S. economy is doing a little better than expected.
Hobson: Well I want to ask you about that because at the same time the Fed was upping its predictions for growth in the U.S. economy this year, we learned that the British economy has slipped back into recession.
Marshall-Genzer: Yeah, there’s a key reason for theatdifference between our economies; that’s according to Richard DeKaser. He’s deputy chief economist at the Parthenon Group. And he told me the U.S. hasn’t cut government spending drastically, but the U.K. has.
Richard DeKaser: They’re determined to reduce their deficits and in fact will do so over the long run but the short-term consequence of that is less government spending and less economic growth overall.
Of course, the U.S. could be following in the U.K.’s footsteps. Remember Congress agreed to big, across-the-board cuts in spending in that deal it reached last year to avoid a U.S. default last year. Those cuts are scheduled to go into effect in 2013.
Hobson: Marketplace’s Nancy Marshall-Genzer in Washington, thanks.
Marshall-Genzer: You’re welcome.
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