Hints Point To Fed In A Holding Pattern

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WASHINGTON (UPI) — U.S. Federal Reserve officials, including the chairman, have hinted the Fed is unlikely to make a major monetary policy shift in its meeting this week.

Chairman Ben Bernanke said the economy was providing mixed signs, pointing out that the labor market, which appears to be improving, does not directly indicate that economic output is also improving.

“In light of the somewhat different signals received recently from the labor market than from indicators of final demand and production … it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery,” he said.

“I am comfortable with the current stance of monetary policy,” said another Fed official, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, The New York Times reported Monday.

“Doing more at this time could create too much inflation risk, and doing less could risk weakening an already slow expansion and causing an unwelcome disinflation,” Pianalto said.

Some Fed observers say conditions are right for another round of stimulus.

In September, the Fed began “Operation Twist,” which involved an exchange of $400 billion short-term securities for long-term securities. That keeps the size of the Fed’s $2.5 trillion portfolio the same but increases the duration of its effect on interest rates.

Analysts expect the Fed to continue monitoring the economy for the next few months and announce a new round of securities swaps in the late spring or early summer.

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