US Fed announces policy steadfastness

Federal Reserve Bank chairman Ben Bernanke signalled on Wednesday, in the Fed’s first ever post-policy meeting press conference, that the US central bank is determined to support the nation’s economy as the labour market continues to linger in a “very, very deep hole”.

Bernanke said the bank will complete the purchase of $600 billion in bonds in June to support the economy’s recovery while maintaining its balance sheet, currently at 42.67 trillion, steady for a time to ensure its support does not fade.

Meanwhile it has also decided to keep overnight interest rates at record low rates of between 0% and 0.25% for “an extended period”.

Durable goods orders in the US rose more than expected in March, rising by 2.5% after an upwardly revised 0.7% rise in February, which was previously reported as a 0.9% decrease.

Economists had expected March’s figure to come in at 2.3% as the month’s orders were buoyed by bookings for motor vehicles, transportation equipment and aircraft.

Meanwhile, US economic growth slowed considerably in the first quarter as higher food and gasoline prices dampened consumer spending and boosted inflation to its fastest pace in two-and-a-half years.

Gross Domestic Product slowed to a 1.8% annual rate after a 3.1% fourth-quarter pace. Economists had expected 2% growth.

In the eurozone, consumer prices rose by 2.8% year-on-year in April, slightly more than was expected by market analysts.

The European Central Bank meets next Thursday to decide on interest rates.

The 17-nation euro area’s unemployment rate remained at a steady 9.9% in March, unchanged from February and in line with economists’ expectations.

Economic output in the UK expanded by 0.5% in the first three months of the year after falling by the same amount in the last quarter of 2010.

The GDP figure was affected by construction output, which posted its biggest drop since 2009.

This article was compiled by Bank of Valletta plc for general information purposes only.