Fed Issues More Upbeat Outlook On Economy

Leaves Key Interest Rates Unchanged, Saying Recession Is Easing And Inflation Not A Major Concern

(AP)  The Federal Reserve said Wednesday that the recession is easing, but signaled that the still-weak economy likely will keep prices in check despite growing concerns that the trillions it's pumping into the financial system will ignite inflation.

Fed Chairman Ben Bernanke and his colleagues held a key bank lending rate at a record low of between zero and 0.25 percent, and pledged again to keep it there for "an extended period" to help brace activity going forward.

Even though energy and other commodity prices have risen recently, the Fed said inflation will remain "subdued for some time." This new language sought to ease Wall Street's concerns that the Fed's aggressive actions to revive the economy will spur inflation later on.

The Fed also decided to maintain existing programs intended to drive down rates on mortgages and other consumer debt. Instead, the central bank again reserved the right to make changes if economic conditions warrant.

The Fed in March launched a $1.2 trillion effort to drive down interest rates to try to revive lending and get Americans to spend more freely again. It said it would spend up to $300 billion to buy long-term government bonds over six months and boost its purchases of mortgage securities. So far, the Fed has bought about $177.5 billion in Treasury bonds.

The Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year. Nearly $456 billion worth of those securities have been purchased.

Fed policymakers noted that the "pace of economic contraction is slowing" and that conditions in financial markets have "generally improved in recent months." That observation about the recession was stronger than after the Fed's last meeting in April.

Economists predict the economy is sinking in the April-June quarter but not nearly as much as it had in the prior six months, which marked the worst performance in 50 years. The economy is contracting at a pace of between 1 and 3 percent, according to various projections.

Fed policymakers said its forceful actions, along with President Barack Obama's stimulus of tax cuts and increased government spending will contribution to a "gradual "return to economic growth.

Bernanke has predicted the recession will end later this year. Some analysts say the economy will start growing again as soon as the July-September quarter.

Fed policymakers noted that consumer spending has shown signs of stabilizing but remains constrained by ongoing job losses, falling home values and hard-to-get credit.

Even after the recession ends, the recovery is likely to be tepid, which will push unemployment higher.

The nation's unemployment rate — now at 9.4 percent — is expected to keep climbing into 2010. Acknowledging that the jobless rate is going to climb over 10 percent, President Barack Obama said Tuesday he's not satisfied with the progress his administration has made on the economy. He defended his recovery package but said the aid must get out faster.

Some analysts say the rate could rise as high as 11 percent by the next summer before it starts to decline. The highest rate since World War II was 10.8 percent at the end of 1982.

The weak economy has put a damper on inflation.

Consumer prices inched up 0.1 percent in May, but are down 1.3 percent over the last 12 months, the weakest annual showing since the 1950s. The Fed suggested companies won't be in any position to jack up prices given cautious consumers, big production cuts at factories and the weak employment climate.

[whitemale08]

It's interesting to see everybody starting to wake-up, but it might be too late.

Once you start bailing out worthless derivatives and credit-default swaps, you have to bail out all 1.4 quadrillion that exists in the world.

Reason: because if you don't then the value of the ones you already bought become even more worthlesss, it's like buying a lemon of a used car.

What Obama should've done, was put the entire Federal Reserve System in RECEIVERSHIP and BANKRUPTCY RE-ORGANIZATION like Lyndon Larouche warned he should do.

That way Goldman Sucks, Citigroup, AIG, JP Morgan and British Banks like Barclay's Capital and Swiss banks like UBS would've had to 'eat' their losses instead of bailing them out!

The American SUCKER!

[despido]

This is so pathetic. A crumb thrown to the masses by the stooge of all stooges.

Tell me who is dumber: Wall Street runs their firms in the ground, rapes the American people and pockets hundreds of billions of dollars - personal profit. They then tell Bernanke and Paulson that if the government doesn't give them hundreds of billions more... the world will explode. Bernanke, Paulson, Reid, Pelosi, Geithner, Bush and Obama fall all over themselves to write the check. In return America gets options on the grifters stock. The same grifters then pocket billions more in bonuses, salaries and retainers while negotiating the re-purchase of their options at 25 cents on the dollar. The government agrees - it will accept $68 billion as full repayment for $250+ billion. Today, these same suits granted their cronies a 50% salary increase, returned to business as usual and threatened to sink Bernanke. Who looks stupid now?

Now, if only these guys were on our side - Ahmadinejad, Putin, Terrorists, whoever.... wouldn't stand a chance. BUT, we got Obama, Giethner and Bernanke. We're doomed.

[nofoolling]

These guys are killing us.

First, the Federal Reserve is no more federal than Federal Express.

The Federal Reserve is owned and operated by 5 or more of the richest men in the world, Rothchild and Rockerfeller are among the owners.

Secondly, they caused this mess in the first place with their voodoo economic scheme called derivatives.

Third, they forced, bribed, and threatened our leaders into passing the bank bailout bill to bail out banks like JP Morgan, Goldman Sachs, and others. According to some reports even threatening marshall law in the U.S. if we didn't comply

Who do you think owns JP Morgan and Goldman Sachs?

If your answer is the same folks that own the Federal Reserve, you win the prize.

Why are we bailing out super ultra rich bankers like Rothchild and Rockerfeller?

Because they own the country and they call all the shots.

These are the guys that tell the President what to do.

[John_Merritt]

Dear Ben and Tim:

As much as I like you guys, please try to peddle 'your spin' on people that are not stupid. While you, and George Soros, says there is no longer a recession; people are slipping deeper into debt and despair. What follows after that: Anger. Who knows what ugly faces that can present. It would be better if you guys would just say we can expect an 11-12% national unemployment rate and that we should not expect to get hired until somewhere in 2010. Unless we want to take that local 7-11 job at the neighborhood corner. This is not any recession anybody has seen in their lifetime or even the history books, because there are way too many moving parts in this one. Meanwhile people who have been stellar consumers and citizens are contemplating things they never would have 5 years ago. Do you know why? Because you guys dropped the ball on responsibility and allowed the US citizen to swing by the rope, with no safety net to catch them. Those of us who saw this coming 7-8 years ago were prepared, but even we are getting, or going to, get hammered soon because we will run out of our savings and 'nest egg' that we worked so hard for. Advice: When you guys can put your heads together with corporate America and give us a 'round about' date when we can expect some 'real relief' in the way of job hirings, it would be greatly appreciated. And if you could please, could you have President Obama tell us, because he is better at being more truthful in his spin. Thank you for your time.

[grabandgo]

Life is good, the companies recieving bail out money are giving themselves raises.
SO WHEN WILL THE REST OF US SEE AN UPSWING, THINGS STILL LOOK PRETTY BAD

[despido]

I guess 'Upbeat' is an improvement from Obama's 'Catastrophe', but in semantics only - the reality is the U.S. is on a slippery slope - and that slope leads directly into the bowl of the toilet.

Its a shame that CBS prefers to ignore an even more important story regarding the FED that broke today. There is a concerted political move to dispose of Bernanke in favor of Larry Sommers. When Sommers is appointed (I feel he will be) in February, the independance of the FED will be gone. The administration will yield heavy influence just as the FED assumes a huge management role in the banking, finance, investment and manufacturing sectors of the economy. To put this mnuch power in the hand of one president is a very bad thing. A truly ominous turn of events.

[u-r-right]

AHHHH-HAHAHAHAHAHAHAHAHAHA!!!! I'm dizzy

[anti-global2]

Get the f--k out of here. What are we idiots? The economy is worse now then it was in January, unemployment is higher, we are going to get hit by inflation, because of speculators we don't even get the advantage of deflation, because they keep manipulating the system to keep prices artifically inflated, 87% of US companies said they don't plan to re-hire those they let go, the 2.4% increase in home sales is only because the prices have dropped severly (funny how the only prices allowed to fall are ones that don't hurt big business, only average people), we are being asked to wor more for less, foreclosures keep rising every month and the bottom is nowhere in sight.
Now where does the FED (part of the problem) get the idea the economic outlook is improving?

[TheStolenGiraffe]

sounds good...but i wonder if they'll still be upbeat after some airlines declare bankruptcy and/or run to the gov't with their hands out. if you follow them you'll notice that their stocks are trading below $10 and have consistently reported losses on their earnings. this along with rising oil prices and a drop in consumer demand spells out nothing but trouble.