WASHINGTON — The Federal Reserve isn’t yet convinced that the U.S. economy is healthy enough for the Fed to ease its stimulus even slightly.
The Fed’s cautious message Wednesday surprised — and pleased — investors, who had expected a slight cut in the Fed’s $85 billion in monthly bond purchases. Wall Street celebrated the prospect of continued low interest rates by sending stocks surging to a record high.
In a statement after a policy meeting, the Fed said it has no set timetable for reducing its stimulus. It all depends how the economy fares.
Chairman Ben Bernanke explained later at a news conference that there are good reasons for the Fed to be cautious about slowing a bond-purchase program that’s designed to keep long-term rates ultra-low:
• The Fed has yet to see conclusive evidence that the job market and economy are approaching full health.
• Rates on mortgages have surged, and the Fed’s bond purchases are needed to hold those rates down and keep home buying affordable for ordinary people.
• A budget stalemate in Congress and the threat of a government shutdown are holding back growth.
“Conditions in the job market today are still far from what all of us would like to see,” Bernanke said.
