In a statement, the officials said consumers have stepped up spending. Still, they said the economy continues to face significant risks, including the debt crisis and risk of recession in Europe.
At his news conference, Bernanke cited Europe’s debt crisis as a particular concern. He said the crisis could threaten confidence and hold back growth.
The vote on the Fed’s policy statement was 9-1. Charles Evans, the president of the Chicago Federal Reserve Bank, dissented. The statement said Evans wanted to take stronger action to try to boost the economy.
The vote was a shift from the previous two Fed meetings, when three members had dissented for the opposite reason: They opposed the Fed’s continued efforts to keep rates at super-lows, for fear it could ignite inflation. Those three members, known as inflation “hawks,” dropped their opposition this time.
“The view of the hawks is that once the decision has been made by the majority, it just causes confusion if they continue to vote to roll back action that has already been taken,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Some analysts said they expected the Fed to take further action to support the economy at coming meetings, given their expectation that growth will remain sub-par.
“Policymakers are keeping the door open because the unemployment rate remains high, and there are clear downside risks from the economic situation in Europe,” said Sal Guatieri, senior economist at BMO Capital Markets.
After their September meeting, the policymakers said they would shuffle the Fed’s investment portfolio to try to further reduce long-term interest rates. And in their previous meeting in August, they had said they plan to keep short-term rates near zero until at least mid-2013, unless the economy improved.
The Fed repeated the mid-2013 target in its statement Wednesday. It also said it was continuing its program to rebalance its portfolio to try to lower long-term rates.
The Fed has kept its key short-term interest rate at a record low since December 2008. This is the rate that banks charge on overnight loans. It serves as the benchmark for millions of business and consumer loans.
The Fed noted that growth strengthened over the summer, in part because temporary factors that had weighed on the economy in the spring had eased. Consumers are able to spend a little more because gas prices have declined from their May peak of roughly $4 a gallon. And auto sales and production have picked up now that supply chains disrupted by the March earthquake in Japan are flowing more freely.
But the Fed said the job market remains weak. And it suggested that the troubles in Europe could hurt U.S. growth.
The Greek prime minister’s surprise move to call a referendum on the country’s latest rescue plan sparked fears that the debt deal could unravel, that Greece could default on its debt and that the crisis could infect the global financial system.
Even if Europe dodges a financial catastrophe, many economists think it’s headed for a recession that would affect the U.S. and global economies. The Fed expressed such concerns after its August meeting.
Still, the Fed remains deeply divided over what, if any, action to take next.View Entire Story
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