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Published: Thursday, 1/27/2011

Federal Reserve votes for bond-purchase plan

WASHINGTON -- The Federal Reserve said Wednesday the economy isn't growing fast enough to lower unemployment and must press ahead with its $600 billion Treasury bond-purchase program.

Ending its first meeting of the year, the Fed made no changes to the program. The decision was unanimous.

The vote included two officials who have criticized the bond purchases, saying the purchases could ignite inflation or speculative buying in assets such as stocks.

The bond-buying program is intended to lower rates on loans and boost stock prices, spurring more spending and invigorating the economy. Chairman Ben Bernanke is challenged with trying to boost hiring and growth without adding new threats. The tax-cut package that took effect this month is easing pressure on the Fed to stimulate growth through bond purchases.

The Fed's assessment of the economy was nearly identical to its last meeting in December. Policymakers seemed to downplay recent economic improvements, including stronger spending by consumers and more production at factories. Instead, the Fed noted the economy continues to face risks. The biggest: that high unemployment will dampen consumer spending, which accounts for 70 percent of national economic activity.

Fed policymakers observed that the "economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions."

One of the Fed's main reasons for undertaking the bond-buying program was to lower high unemployment, now at 9.4 percent. The Fed kept its pledge to hold a key interest rate at a record low near zero for an "extended period." The Fed has kept rates at ultralow levels since December, 2008, to encourage people and businesses to spend more.



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