Thursday October 25, 2012

WASHINGTON (AP) -- Two weeks before a U.S. election focused on the economy, the Federal Reserve said Wednesday that its help is still needed to increase growth and lower unemployment.

The Fed took no action after a two-day policy meeting. It wants time to assess whether the aggressive steps it launched in September will help the economy.

Last month, the Fed began buying mortgage bonds to try to push long-term interest rates lower and make home buying more affordable. It also said it planned to keep its benchmark short-term rate near zero through mid-2015.

In a statement Wednesday, the Fed said the U.S. economy is improving moderately. But it said job growth has been slow and the unemployment rate remains elevated.

It noted that consumer spending has strengthened slightly and that housing has shown further signs of improvement. Growth in business investment has slowed, though.

The Fed said inflation has recently risen slightly because of higher energy prices. But it said inflation over the long run should remain mild.

The Fed’s statement was largely expected, and it didn’t move stock or bond prices.

"After the big changes in September and the presidential election less than two weeks away, officials were probably happy to make this week’s meeting as much of a non-event for markets as possible," said Jim O’Sullivan, chief U.S. economist for High Frequency Economics.

The statement was approved on an 11-1 vote.


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Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, objected for the seventh consecutive meeting. Lacker has been concerned that the Fed’s policy steps could lead to higher inflation.

The unemployment rate fell in September to 7.8 percent, the first time it’s been below 8 percent since January 2009. But the economy is still growing too slowly to accelerate job growth.

The economy grew at a meager 1.3 percent annual rate in the April-June quarter. Economists think it grew slightly faster in the July-September quarter. The government will report its first estimate of third-quarter growth on Friday.

Still, many employers remain wary of hiring, in part because of tax increases and spending cuts set to kick in next year and also because of a slowing global economy.