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Fed could boost or curb stimulus

Wednesday, May 01, 2013 - 02:10

May 1- The U.S. Federal Reserve said it will maintain its aggressive monetary policy- even if that means boosting the pace of stimulus. Bobbi Rebell reports.

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The Fed is on the fence. While it's sticking to its aggressive current plan to buy $85 billion of bonds a month to support the economy and keep rates low- it now says not only could those purchases taper off- they could expand. Reuters columnist James Saft: SOUNDBITE: JAMES SAFT, REUTERS COLUMNIST (ENGLISH) SAYING: "This is the first time the Fed has explicitly discussed the possibility of doing more QE. What we have been talking about thus far is the possibility of tapering. When we might do it, how we might do it. But now, for the first time, they are introducing this other possibility which is they may have to do even more." While the Fed said the economy continues to grow modestly, and that it sees improvement in the job market- they added that unemployment is still too high. The statement also pointed out very directly that fiscal policy- something the Fed does not control - is restraining growth. Moody's Capital Markets Chief Economist John Lonski: SOUNDBITE: JOHN LONSKI, CHIEF ECONOMIST, MOODY'S CAPITAL MARKETS (ENGLISH) SAYING: "It's not the greatest idea in the world to apply fiscal austerity to an economy that is having trouble getting off the ground. And here I am talking about both cutbacks in government spending, as well as tax hikes. You know it may have been a better choice to just increase taxes gradually, or not at all, until this economy could grow on its own without special help from the Federal Reserve." Earlier in the day, a report on private sector jobs came in much weaker than expected. The monthly jobs report comes out Friday- and expectations are for 145,000 jobs. SOUNDBITE: JOHN LONSKI, CHIEF ECONOMIST, MOODY'S CAPITAL MARKETS (ENGLISH) SAYING: "If job growth is say less than 125,000 for the month of April, we could be moving closer toward additional action by the Fed to lend buoyancy or support to a weakening U.S. economy." The Fed will also maintain its overnight interest rate, known as the Fed Funds rate at close to zero- where it's been since late 2008.

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Fed could boost or curb stimulus

Wednesday, May 01, 2013 - 02:10