Fair
56°FFairFull Forecast

Fed offers no clearer hint on first rate increase

Published: Wednesday, July 30, 2014 1:41 p.m. CDT
Caption
(AP Photo/Susan Walsh, File)
FILE - In this July 2, 2014, file photo, Federal Reserve Chair Janet Yellen speaks at the International Monetary Fund in Washington. The Federal Reserve is widely expected to make sixth reduction in bond purchases Wednesday, July 30, 2014.

WASHINGTON — The Federal Reserve is further slowing the pace of its bond purchases because it thinks an improving U.S. economy needs less help. But it's offering no clearer hint of when it will start raising its benchmark short-term interest rate.

The Fed on Wednesday reiterated its plan to keep short-term rates low "for a considerable time" after its bond purchases end. Most economists think a rate increase is about a year away despite a strengthening economy. The government estimated Wednesday that the economy grew at a fast 4 percent annual rate last quarter.

In a statement after a two-day policy meeting, the Fed revised the wording of its previous statement to acknowledge that while the unemployment rate has fallen steadily, the job market remains subpar in other ways. The Fed didn't specify what it meant. But Chair Janet Yellen expressed concern to Congress this month about stagnant wage growth, a high number of part-time workers who can't find full-time jobs and the proportion of the unemployed who have been out of work for more than six months.

The Fed also tweaked its statement to say inflation had risen closer to its 2 percent target. The statement said concerns that inflation would persistently run below the Fed's 2 percent target had "diminished somewhat." But it expressed no concerns about the slight acceleration in prices.

The Fed announced, as expected, that it's paring its monthly purchases by another $10 billion to $25 billion. The bond purchases have been intended to keep long-term borrowing rates low and are set to end in October.

The Fed's decision was approved on a 9-1 vote with Charles Plosser, president of the Fed's Philadelphia regional bank, dissenting. The statement said Plosser objected to continuing to include language that the Fed's key short-term interest rate was likely to remain at record low near zero "for a considerable time" after the end of its bond purchases. Plosser felt that language did not "reflect the considerable economic progress that has been made."

Get breaking and town-specific news sent to your phone. Sign up for text alerts from the Daily Chronicle.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Watch Now

Player embeded on all DDC instances for analytics purposes.

Week 9 - 3 Point Stance

More videos »

Reader Poll

What is your favorite part of this year's Sycamore Pumpkin Festival?
Parade
Unveiling of the Wally Thurow Statue
Decorated pumpkins
Pumpkin pie-eating contest
Carnivals