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Fed's hard sell for easy money

Tuesday, March 13, 2012 - 02:09

Mar 13 - Federal Reserve Chairman Ben Bernanke and his merry members of the Fed's interest rate setting committee meet amid signs the U.S. rebound is gaining ground. Conway G. Gittens reports.

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Federal Reserve chairman Ben Bernanke driving in to work as he keeps his foot on the gas when it comes to his near zero interest rate policy. After meeting for a day, policymakers kept a pledge to keep interest rates near zero until 2014 and continue buying debt in an attempt to keep rates low. The Fed in its statement admits "…the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated." It's that "but" that is making the Fed reluctant to back-off a policy put in place during the financial crisis. Fact and Opinion Economics' Robert Brusca: SOUNDBITE: ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS (ENGLISH) SAYING: "There is a lot of job growth in the economy. The private sector report, the ADP, is showing a lot of job growth. We know that initial jobless claims are low but GDP has been slow to come around, consumer spending is only just starting to get a little bit better. We had a pretty good report on retail sales. They revised up the past data that tends to make it look even stronger, but it still isn't a number you can take to the bank." And that is what the Fed is looking for: confirmation of a sustained recovery before it completely takes quantitative easing, or QE3, off the table, and starts talking a policy shift. SOUNDBITE: ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS (ENGLISH) SAYING: "The risks are that something could happen. The economy could tail off. It's not what I think is happening, but I think that if you're Bernanke and if you've got the finger on the switch it makes you more cautious and makes you want to really, really be sure before you flick that switch and say we are going in another direction." Some Fed watchers are betting that if the economy continues to post heftier retail sales figures, the labor market grows stronger, and inflation starts to heat up, Bernanke and crew may have to start backing off parts of that ultra cheap money policy as early as this summer. Conway Gittens, Reuters

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Fed's hard sell for easy money

Tuesday, March 13, 2012 - 02:09