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US economy has picked up: Federal Reserve

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Press Trust of India Washington
Last Updated : Jan 20 2013 | 12:09 AM IST

Signalling that the American economy is slowly coming out of the woods, the US Federal Reserve has said economic activity has picked up in recent months.     

The apex bank, while retaining key interest rates at near zero, observed that conditions in both financial and housing sectors have improved.     

Grappling with one of the financial storms in decades, the recession-hit US economy has seen massive job losses and deteriorating financial situation with a GDP contraction of one per cent in the second quarter of 2009.     

"Economic activity has picked up following its severe downturn. Conditions in financial markets have improved further and activity in the housing sector has increased," the Federal Open Market Committee said on Wednesday after its two-day monetary policy meeting.     

Retaining the benchmark interest rates at near zero the US Fed noted that it would continue for a longer time. The key rates have been kept in the range of 0-0.25 per cent since December last year as part of the Federal government's efforts to kick start the nation's sagging economy.     

The US Fed said it continues to anticipate that economic conditions are likely to warrant exceptionally low levels of federal funds rate for an extended period. According to the central bank, even though economic activity is likely to remain weak for some time, policy actions would help in bolstering economic growth.

The US Fed said household spending seems to be stabilising but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.     

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"Businesses are still cutting back on fixed investment and staffing, though at a slower pace," it added.

Embarking on its initiatives to revive the economy, the US Fed would continue with its $1.45 trillion programme to purchase mortgage-backed securities and other assets.     

The statement noted that the pace of buying would gradually slow down in order to promote a smooth transition in markets and "anticipates that they will be executed by the end of the first quarter of 2010". These measures are aimed at supporting mortgage lending and housing markets, which are among the worst hit in the ongoing financial turmoil.     

The US Fed anticipates inflation to remain "subdued" for some more time.

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First Published: Sep 24 2009 | 5:28 PM IST

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