The Federal Reserve signaled Tuesday that it is worried about the
weakness of the recovery and is ready to take further steps to
boost the economy if needed. Fed officials said they are also
concerned that sluggish economic growth could prevent prices from
rising at a healthy rate.
But at the end of its meeting, the Fed held off on taking any new
steps to rejuvenate the economy and drive down unemployment.
Instead, it hinted that it is prepared to see if the economy can
heal on its own.
Stock prices, which had been relatively flat before the Fed's
statement, rose afterward. The Dow Jones industrial average was up
nearly 60 points minutes shortly after.
The meeting is the Fed's last before the Nov. 2 elections, and it
comes as voters are focused on the economy and the jobs crisis.
Polls show they are inclined to punish Democrats in Washington for
the sluggish economy.
The Fed used the same language it did in August to sketch a
downbeat view of the economy. It concluded that economic activity
has slowed in recent months. And it warned that the pace of growth
is likely to be "modest in the near term," almost identical to the
assessment the Fed made a month ago.
But the Fed delivered a stronger signal that it would take new
steps to help the economy. The Fed said it is "prepared to provide
additional accommodation." In its previous policy statements, the
Fed didn't go that far. Instead, it had said it will "employ its
policy tools as necessary."
The Fed said it is more worried about prices falling than rising
because the economy is so weak. The Fed didn't use the word
deflation. But some economists have raised concerns about the
country sliding into a deflationary spiral. That's a widespread
drop in wages, prices of goods and services and the value of stocks
For the sixth straight meeting, Thomas Hoenig, president of the
Federal Reserve Bank of Kansas City, was the sole dissenter.