United States: the recovery is more fragile
Posted by admin | Under business, international, money, people, publications Thursday Jun 24, 2010The Federal Reserve took action Wednesday in a hesitant economic recovery in the United States by renewing its commitment to keep rates unusually low for an extended period. The Fed funds rate has been maintained in a range from 0% to 0.25%, which it has not budged since December 2008.
In his statement issued after a two-day meeting, the central bank is lowering its assessment of the pace of recovery, revealing pockets of weakness. It also is cautious about the volatility of financial markets, given the debt crisis in Europe. But she still insists that the economy will emerge gradually from the worst recession it has seen in decades.
"The financial support under the overall economic growth, which mainly reflects what is happening abroad," the Fed said in its statement.
The Fed President Thomas Hoenig, Kansas City has expressed its disapproval for the fourth consecutive time, holding that the commitment of the Fed to keep rates ultra low long could perpetuate a cycle of alternating periods of high growth phases and depression.
Realtors Falters
The Fed also notes that the economic recovery is underway. But short of what she observed in April, when she said that the economy continued to strengthen.
The monetary authorities have also noted a slowdown became evident in real estate. In April, it was noted that one starts to straighten. On Wednesday, they simply say that these starts "remain at a depressed level. It is true that the indicators are really not good. On Wednesday, new home sales for May fell 32%.This unprecedented decline in new home sales in May reduced to little hopes of a speedy resumption of growth.
As for consumer spending, the central bank said they "are increasing but remain constrained by high unemployment, modest revenue growth and a decrease in the rich heritage." In April, the Fed had referred to an acceleration of these costs.
The Fed also notes a recent slowdown in inflation, citing a drop in prices of energy and other resources.
Most economists believe the next move on interest rates will be higher but some of them say the central bank should consider other ways to boost growth and credit. What must be added the problems of the debt in Europe and the employment indicators also disappointing.