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US Fed to end bond-buying program on schedule

(Xinhua)
Updated: 2011-06-23 06:56

WASHINGTON - The US economic recovery is going more slowly than expected, but the Federal Reserve will end its $600-billion Treasury bond purchase program by the end of June as scheduled, said the Fed in a statement released on Wednesday.

The economic recovery is continuing "at a moderate pace, though somewhat more slowly than the Committee had expected," the Fed noted in the statement released after a meeting of the Federal Open Market Committee (FOMC), the interest rate policy-making body of the central bank.

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Based on information received since the FOMC met in late April, the overall conditions in the labor market are "weaker than anticipated," the Fed said.

Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed, it noted.

The Fed said that inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions.

Still, the Fed sees longer-term inflation expectations "have remained stable."

The Fed said that the slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.

Although the economic recovery is not strong enough, the Fed said it will complete its purchase of 600 billion dollars of longer-term Treasury securities as scheduled. The program, launched last November, aimed to help the economy grow more strongly and lower unemployment, which now stands at 9.1 percent.

The central bank also decided to keep the federal funds rate at the historically low level of zero to 0.25 percent, a policy that the Fed has been keeping since December 2008 after the outbreak of the financial crisis.

Moreover, the Fed said it will maintain its existing policy of reinvesting principal payments from its securities holdings, which is considered another instrument of easing monetary policy to stimulate the economy.

Ben Bernanke, chairman of the Fed, said earlier this month that he expected the recovery to get more strength in the second half of this year.