Economic Stimulus, Federal Reserve | featured news

The Federal Reserve said Wednesday that it would continue its stimulus campaign at the same pace it has maintained since December, just as investors had expected.

The central bank affirmed that it would keep up its existing efforts to stimulate the economy, even though it expected a return to moderate growth.

The Federal Reserve has left little doubt about its plans, but inside the central bank, debate is moving from whether the Fed should do more to stimulate the economy to when it should start doing less.

Chairman Ben Bernanke offered a wide-ranging defense Monday of the Federal Reserve's aggressive policies to stimulate the still-weak economy. The Fed needs to drive down long-term borrowing rates because the economy isn't growing fast enough to reduce high unemployment, Bernanke said in a speech to the Economic Club of Indiana. The unemployment rate is 8.1 percent.

The Federal Reserve, hoping to give another shot in the arm to the pallid recovery, announced it would launch a new round of a controversial bond-buying stimulus program. The central bank also further extended its pledge to keep short-term interest rates near zero, now through the middle of 2015.

The Fed is on the verge of expanding its stimulus policies. We learned that much during the meetings in Jackson Hole, Wyo. But what may be more interesting is the undercurrent of discussion about what happens when those measures prove insufficient.

A growing number of small and medium-sized banks are merging as shrinking profit margins, tepid loan demand and low interest rates place pressure on their operations. Conditions are unlikely to improve as the Federal Reserve contemplates another round of stimulus that could push rates even lower.

As the Federal Reserve meets Tuesday and Wednesday to consider new stimulus for the weak economy, one of the key data it will be looking at is consumer spending, which is clearly waning.

Federal Reserve Chairman Ben S. Bernanke gave no indication Tuesday that the central bank was about to launch new economic stimulus, even as the Fed chief painted a worrisome picture of an economy losing momentum on a wide scale.

Federal Reserve officials sent new signals they are seriously considering more actions to bolster the economic recovery but disappointed many investors by not indicating they are committed to taking action.