The Free Press, Mankato, MN

Business

June 19, 2013

Fed suggests it's closer to slowing bond purchases

(Continued)

The central bank also said it would maintain its plan to keep short-term rates at record lows at least until unemployment reaches 6.5 percent.

The Fed also released its latest economic projections Wednesday. Fed officials predicted that unemployment will fall a little faster this year, to 7.2 percent or 7.3 percent at the end of 2013 from 7.6 percent now. They think the rate will be between 6.5 percent and 6.8 percent by the end of 2014, better than its previous projection of 6.7 percent to 7 percent.

The Fed also said inflation was running below its 2 percent long-run objective, but noted that temporary factors were partly the reason. It said inflation could run as low as 0.8 percent this year. But it predicts it will pick up next year to between 1.4 percent and 2 percent.

"The more upbeat tone and the change in the unemployment forecast will only encourage expectations for action soon," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note. "We continue to believe that tapering could start at the Sept. 17-18 meeting."

The statement was approved on a 10-2 vote. James Bullard, the president of the Federal Reserve Bank of St. Louis, objected for the first time this year, saying he wanted a stronger commitment from the Fed to keep inflation from falling too low.

Esther George objected for the fourth time this year, again voicing concerns about inflation rising too quickly.

During his news conference, Bernanke declined to address speculation that he will step down as Fed chairman when his term ends in January.

He was asked to respond to comments Monday by President Barack Obama, who said Bernanke had already stayed longer than planned. The president's remarks added to expectations that Bernanke intends to step down.

Bernanke avoided the question.

"I would like to keep the discussion on monetary policy," he said. "I don't have anything for you on my personal plans."

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