- The Washington Times - Wednesday, June 20, 2012

The Federal Reserve on Wednesday afternoon signaled its concern about the weakening of the U.S. economy and extended a program aimed at holding down long-term interest rates to prop up growth.

The action follows a marked darkening of the U.S. economic outlook in the last two weeks as reports have shown a rapidly deteriorating economy threatened by the renewed outbreak of crisis in Europe and a looming deadline for draconian tax increases and spending cuts at the end of the year.

Besides extending its current easing programs for the economy, Fed chairman Ben S. Bernanke said at a news conference that the central bank is prepared to do more to support growth, particularly if the European crisis worsens in coming weeks.

“We are prepared to do what is necessary” to ensure the economy keeps growing, he said, but noted that what’s happening in the economy “is not entirely clear.”

“We have to get further information about the state of the economy, about where things are going and about what’s happening in Europe,” before deciding whether to act further, he said.

In a statement after a two-day meeting of its rate-setting committee, the Fed cited recent dour developments, noting that job growth and consumer spending have slowed recently. It said that while it expects moderate growth to continue, the pace of growth is not strong enough to ensure continued improvement in the 8.2 percent unemployment rate.

The Fed also said that the economy is threatened by renewed turmoil in financial markets sparked by an intensification of the European debt crisis in recent weeks. That presents “significant downside risks” for growth, it said.

“To support a stronger recovery,” the committee said, the central bank will maintain its “highly accommodative stance on monetary policy.” The Fed said it will stick with plans to keep short-term interest rates near zero through 2014 as well as purchase and reinvest in Treasury bonds and mortgage bonds to hold long-term interest rates near record lows.


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