Instant View: Fed notes economic pullback, says likely temporary

Published January 30, 2013

| Reuters

The Federal Reserve on Wednesday left in place its monthly $85 billion bond-buying stimulus plan, saying economic growth had stalled but indicating the pullback was likely temporary.

Describing the nation's job market as continuing its modest pace of improvement, the Fed repeated a pledge to keep purchasing securities until the outlook for employment improves substantially.

KEY POINTS: * The Fed's bond-buying program is part of the central bank's unprecedented efforts to spark a stronger economic recovery and drive down unemployment. * The Fed has kept overnight interest rates near zero since late 2008 and it has tripled its balance sheet to about $3 trillion through its purchases of securities, which are aimed at pushing longer-term borrowing costs lower. * However, the recovery from the 2007-2009 recession has been stubbornly tepid.

COMMENTS:

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

"It is interesting that the Fed decided to focus on the GDP report, pointing to how activity slowed because of transitory factors. That sums up the GDP report. I am a bit puzzled why the Fed focused solely on one report. I would argue that this was a slightly dovish report."

MARKET REACTION:

STOCKS: U.S. stock indexes edged lower

BONDS: U.S. bond prices pared losses slightly

FOREX: The dollar was stable

(Americas Economics and Markets Desk; +1-646 223-6300)

URL

http://www.foxbusiness.com/news/2013/01/30/instant-view-fed-notes-economic-pullback-says-likely-temporary/