On January 30th the Federal Reserve confirmed that economic growth has paused in recent months. This month’s report from the Federal Reserve follows the announcement last month that, for the first time, the Fed will tie its policies to specific economic indicators—including the national unemployment rate.
Earlier in the day, the Commerce Department said that the economy had shrunk at an annual rate of 0.1 percent—mainly because companies restocked at a slower rate and the government slashed defense spending.
But, citing weather-related disruptions and other temporary factors, the Fed noted in its statement that unemployment continues to expand at a moderate pace and that consumer spending, business investment and the housing sector all show improvement.
To further boost the economic forecast, the Fed has reaffirmed its commitment to bolstering the sluggish U.S. economy by borrowing cheaply for the foreseeable future, as well as keeping its key short-term interest rate at a record low until unemployment falls below 6.5 percent at least.
The Fed also re-stated that it will continue its bond purchases until the job market improves substantially. However, some private economists think that the Fed is more likely to suspend its bond purchases in the second half of the year, noting that the minutes of the December meeting revealed a split with only some of the 12 voting members thinking the bond purchases would be needed through 2013.
On Friday, February 1st, the government released its jobs report for January. Unemployment rose slightly to 7.9 percent.