Economic stimulus is here to stay and U.S. lawmakers are to blame for sluggish economic growth, the Federal Reserve said in a statement released on Wednesday.
“Fiscal policy is restraining economic growth,” the Fed said in reference to recent tax increases and budget cuts passed by Congress and the White House.
“The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate,” the statement added
“The Committee continues to see downside risks to the economic outlook.”
The statement underscores the Fed's absolute commitment to lowering unemployment, despite growing concerns over its never-ending stimulus policies.
The Fed maintained its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. And it said it will continue to buy $85 billion a month in Treasury and mortgage bonds. The bond purchases are intended to keep long-term borrowing costs down and encourage borrowing and spending.
The statement also signaled its concern about a Social Security tax increase, which took effect Jan. 1, and the automatic spending cuts that kicked in March 1 (i.e. “sequester”). The across-the-board spending cuts took effect automatically after Congress failed to reach a budget deal.
Markets were shaky all day and the announcement didn’t help anything:
Here’s the full statement:
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The Associated Press contributed to this report.