Make us your home page
Instagram

Experts expect Federal Reserve to take steps to bolster economy

WASHINGTON — The U.S. job market is flagging and consumer prices are barely rising. The picture sketched by data released Thursday has made some economists predict the Federal Reserve will announce some new step to boost the economy when it meets Tuesday and Wednesday.

Applications for unemployment benefits rose last week, pointing to a fourth straight month of sluggish hiring in June. And consumer prices were pulled down in May by a plunge in gas prices.

Weekly unemployment benefit applications increased to a seasonally adjusted 386,000, the Labor Department said. The four-week average, a less volatile measure, rose for the third straight week, to 382,000. That's the highest level in six weeks.

Weak job growth raises pressure on the Fed because part of its mission is to boost employment. Mild inflation gives policymakers more leeway to act. If inflation were threatening to accelerate, Fed policymakers might feel compelled to raise interest rates.

Fed officials are "likely to go into that meeting feeling a little chastened and looking for a way to support the economy," said Jeremy Lawson, an economist at BNP Paribas.

Economists say the Fed is likely to extend a current program during next week's meeting that swaps short-term Treasury securities for bonds with longer maturities. The program expires at the end of the month.

Known as "Operation Twist," the goal is to further lower long-term interest rates to encourage borrowing and spending.

Diane Swonk, chief economist at Mesirow Financial, said allowing the program to end could result in tighter credit and make it harder to buy or refinance homes.

The reason: A key part of the program is buying new mortgage-backed securities with the proceeds from those that mature. Without those purchases, banks might issue fewer mortgages.

The Fed forecast at its April meeting that the economy would grow about 2.7 percent this year. But many economists are predicting slower growth after seeing the economy slump this spring. Employers added an average of only 96,000 jobs per month in past three months. Consumers barely increased spending at retail businesses in May. And European leaders are struggling to contain their financial crisis, which has already plunged much of the region into recession.

"You look at all this and say, 'Where's the growth going to come from?' " Lawson said.

One hopeful sign is that consumers are finally seeing relief from higher gas prices, which could revive spending this summer.

The consumer price index dropped 0.3 percent in May, the Labor Department said in a separate report. It was the largest decline since December 2008 and mainly because of a 6.8 percent drop in gas prices. Food costs were unchanged.

Over the past 12 months ending in May, consumer prices rose 1.7 percent, much less than April's pace. It's also below the Fed's target of a 2 percent annual gain.

Experts expect Federal Reserve to take steps to bolster economy 06/14/12 [Last modified: Thursday, June 14, 2012 10:03pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Trigaux: How Moffitt Cancer's M2Gen startup won $75 million from Hearst

    Business

    TAMPA — A Moffitt Cancer Center spin-off that's building a massive genetic data base of individual patient cancer information just caught the attention of a deep-pocketed health care investor.

    Richard P. Malloch is the president of Hearst Business Media, which is announcing a $75 million investment in M2Gen, the for-profit cancer informatics unit spun off by Tampa's Moffitt Cancer Center. Malloch's job is to find innovative investments for the Hearst family fortune. A substantial amount has been invested in health care, financial and the transportation and logistics industries.
  2. Three-hour police standoff ends, thanks to a cigarette

    News

    TAMPA — A man threatening to harm himself was arrested by Tampa police on Tuesday after a three-hour standoff.

  3. Another Hollywood nursing home resident dies. It's the 9th in post-Irma tragedy.

    State Roundup

    The Broward County Medical Examiner's office is investigating another death of a resident of the Rehabilitation Center at Hollywood Hills — the ninth blamed on the failure of a cooling system that became a stifling deathtrap three days after Irma hit.

    Carlos Canal, pictured at 47 years old, came to Miami from Cuba in 1960. Above is his citizenship photo. [Courtesy of Lily Schwartz]
  4. Despite Hurricane Irma, Hillsborough remains on pace to unlock hotel tax that could pay for Rays ballpark

    Tourism

    TAMPA — Despite the threat of a catastrophic storm, it was business as usual at many Hillsborough County hotels in the days before Hurricane Irma bore down on the Tampa Bay region.

    The Grand Hyatt near TIA closed during Hurricane Irma, but many other Hillsborough hotels were open and saw an influx.
  5. New Graham-Cassidy health care plan stumbles under opposition from governors

    Nation

    WASHINGTON — The suddenly resurgent Republican effort to undo the Affordable Care Act was dealt a blow on Tuesday when a bipartisan group of governors came out against a proposal gaining steam in the Senate.

    Sen. Lindsey Graham, R-S.C., joined by, from left, Sen. Roy Blunt, R-Mo., Majority Whip John Cornyn, R-Texas, Sen. John Barrasso, R-Wyo., Sen. Bill Cassidy, R-La., Senate Majority Leader Mitch McConnell, R-Ky., and Sen. John Thune, R-S.D., speaks to reporters as he pushes a last-ditch effort to uproot former President Barack Obama's health care law, at the Capitol in Washington, Tuesday, Sept. 19, 2017. To win, 50 of the 52 GOP senators must back it -- a margin they failed to reach when the chamber rejected the effort in July. [/J. Scott Applewhite | Associated Press]