por admin » Mié Feb 16, 2011 2:25 pm
ECONOMYFEBRUARY 16, 2011, 2:04 P.M. ET
Fed Minutes Show Upgraded Outlook
By LUCA DI LEO And JEFF BATER
Federal Reserve officials were slightly more optimistic about the U.S. economic outlook when they last met three weeks ago, but not enough to call an early end to their $600 billion bond-buying program.
Minutes of the Fed's policy-setting meeting Jan. 25-26, released with the customary lag Wednesday, showed central bank officials expect U.S. gross domestic product to increase between 3.4% and 3.9% this year. That compares with a November 2010 prediction the economy would expand between 3.0% and 3.6% in 2011.
Though the economy looks a bit stronger, central bank officials expect the unemployment rate to remain at a high level between 8.8% and 9.0% at the end of 2011, even after January's decline to 9.0%. Despite the recent surge in food and energy prices, inflation is seen between 1.3% and 1.7%, in line with the November projections and where the Fed wants prices to be.
With inflation seen staying low and unemployment high, Fed officials decided to keep in place their easy-money policies, including buying government bonds, at their first Federal Open Market Committee meeting of 2011. The bond purchases -- which began after the recovery stumbled in the middle of last year and are due to end in June -- are aimed at boosting the economy by keeping interest rates low and lifting stocks.
Though officials voted unanimously to keep buying bonds, some in the FOMC -- currently 11 members because of a vacancy on the Fed board in Washington -- have spoken out against the policy, warning it could lead to an outbreak of inflation.
The minutes showed a minority within the Fed remain unsure about how much the bond purchases are helping the economy and believe the stimulus should be reconsidered if data continues to point to a sufficiently strong economy.
"However, others pointed out that it was unlikely that the outlook would change by enough to substantiate any adjustments to the program before its completion," the minutes said.
A strengthening U.S. economy amid rising international prices for food and energy led the Fed's inflation hawks to stir this month. Richard Fisher, president of the Federal Reserve Bank of Dallas and an FOMC voter, said he can live with the program until June but would firmly oppose expanding it.
FOMC members "emphasized" the central bank would continue to regularly review the pace of its securities purchases and would adjust the bond program as needed to foster maximum employment and price stability, the minutes showed.
Fed officials three weeks ago projected consumer prices will stay below 2.0% in 2012, even though the GDP should rise by around 4.0%. But more recent data points to a clear upward trend in prices.
U.S. wholesale prices increased across the board in January, data showed Wednesday. Underlying producer prices, which are considered a better inflation gauge by the Fed because they are net of volatile energy and food items, climbed a monthly 0.5% -- the biggest gain in more than two years and double what Wall Street economists expected.
Until recently, the U.S. central bank has been focusing on how to ease monetary policy more given the persistent weakness in the economy. With the economy growing more briskly and inflation turning up, especially overseas, the discussion is expected to turn to when -- and how -- to take the foot off the gas.