snow
Tuesday February 9th, 2016 7:45PM

Yellen: US economy still needs help from Fed

By The Associated Press
WASHINGTON (AP) -- Federal Reserve Chair Janet Yellen thinks the U.S. economy still isn't healthy enough to grow at a consistently strong pace without help from the Fed.<br /> <br /> Yellen made clear at a news conference Wednesday that despite a steadily improving job market and signs of creeping inflation, the Fed sees no need to raise short-term interest rates from record lows anytime soon.<br /> <br /> Her remarks followed a statement from the Fed that it would further slow the pace of its long-term bond purchases. The bond purchases have been intended to keep long-term loan rates low. But the Fed offered no clear signal about when it will start raising its benchmark short-term rate.<br /> <br /> Most economists think a rate increase is at least a year away despite signs of rising inflation. And at her news conference, Yellen downplayed inflation concerns.<br /> <br /> Recent inflation figures are "noisy," Yellen said.<br /> <br /> Her comment suggested that the Fed doesn't see inflation as a threat that it would soon need to combat with higher interest rates.<br /> <br /> The Fed's statement, issued after a two-day policy meeting, was nearly identical to the one it issued after its last meeting in April. It reiterated its plan to keep short-term rates low "for a considerable time" after it ends its bond purchases.<br /> <br /> The Fed also downgraded its forecast for growth for 2014, acknowledging that a harsh winter caused the economy to shrink in the January-March quarter. In addition, the Fed barely raised its forecast for inflation.<br /> <br /> The Fed expects growth to be just 2.1 percent to 2.3 percent this year, down from 2.8 percent to 3 percent in its last projections in March. It thinks inflation will be a slight 1.5 percent to 1.7 percent by year's end, near its earlier estimate.<br /> <br /> It foresees the unemployment rate, now at 6.3 percent, dipping to between 6 percent and 6.1 percent by the end of this year. That's a slight improvement from the Fed's forecast in March, when it predicted that unemployment would be as high as 6.3 percent at year's end.<br /> <br /> Stock investors appeared pleased with the Fed's message that rates would remain low. The market closed higher, with the Standard & Poor's 500 index reaching another record. <br /> <br /> The Fed's decision to further pare its bond buying means its monthly purchases of long-term bonds will be reduced from $45 billion to $35 billion starting in July. It marked the fifth cut in the purchases since December as the Fed slows the support it's providing the economy.<br /> <br /> The bond buying is expected to end altogether by fall.<br /> <br /> The Fed's statement was approved on an 11-0 vote, with support from the Fed's three newest members: Vice Chairman Stanley Fischer, board member Lael Brainard and Loretta Mester, the new president of the Fed's regional bank in Cleveland.<br /> <br /> The slight changes in the Fed's statement pointed to signs of a strengthening economy now that a brutal winter has passed. The statement said economic activity had "rebounded," with gains in the job market, household spending and business investment.<br /> <br /> The statement signaled no concern about the recent acceleration in inflation. It repeated language on inflation in which the Fed said it was still concerned that inflation remained below its 2 percent target.
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