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Sunday 28th of June 2009
June 25, 2009

US Fed acknowledges economy will remain weak


by Kay Murchie
US Fed acknowledges economy will remain weak

The Federal Reserve has kept interest rates unchanged at the range of between zero and 0.25%.

The Fed acknowledged that even though energy and commodity prices have recently risen, inflation will remain “subdued for some time”.

Furthermore, the Fed suggested that the pace of economic contraction is slowing but the economy will remain weak.

The central bank said that over the last few months, conditions in financial markets have generally improved.

In addition, consumer spending is showing signs of stabilising but remains constrained by the impact of unemployment.

In a further sign of stability, the National Association of Realtors announced earlier this week that sales of previously owned homes in the US rose in May, albeit at a slower-than-expected pace.

The organisation said sales rose 2.4% to an annual rate of 4.77 million units, up from the revised 4.66 million reported in April. Analysts had expected a 4.81 million-unit pace for the month of May.

The organisation pointed out that the rise marks the second consecutive monthly rise and point to a recovery, albeit sluggish.

In March, the Fed implemented quantitative easing (also known as printing money) - a process designed to boost and promote economic recovery. The Fed said it will continue to “evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets”.

In related news, the Organisation for Economic Cooperation and Development suggested yesterday that activity in the US could bottom out in the latter half of the year.

Furthermore, earlier this month the Group of Eight (G8) industrialised nations acknowledged that there are signs of stabilisation in the world’s leading economies.

G8 ministers said stock markets were rising, interest rates more stable, and consumer confidence was returning.

The G8 nations comprise the United States, Germany, Japan, Britain, France, Italy, Canada and Russia.

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