Between a stalled recovery in the United States, a major debt crisis in Europe, fallout from the earthquake in Japan, a recent fuel price spike, and gridlock in Washington where legislators have reached consensus in favor of austerity measures, speculation had climbed over the last several days that the Federal Reserve would intervene by buying up a significant amount of assets, injecting money into the economy -- a new round of so-called "Quantitative Easing".
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But in a statement after a regular meeting of the Fed's Open Market Committee, the central bank decided to continue its current policies, with the caveat that they might start loosening those policies if things don't improve quickly.
Here's their assessment of the weak state of the economic recovery. "[E]conomic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, 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, appear to account for only some of the recent weakness in economic activity."
But though unemployment remains significantly higher than the Fed's employment mandate requires, they're not really ready to intervene in a major way just yet. "The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate."
Full statement below: