Federal Reserve officials indicated last month that it was too early to consider scaling back their plan to buy a total of $600bn in long-dated Treasury bonds by the end of June, in spite of the acceleration in the US economic recovery.
The US central bank’s resistance to reversing the quantitative easing programme – nicknamed QE2 – came even as officials offered a more encouraging snapshot of the economy. They said growth would pick up “somewhat” in the coming months, citing a better “tone” in the labour market and stronger measures of production and consumer spending.
They also pointed to the $858bn fiscal package signed into law by President Barack Obama last month – which extended Bush-era tax rates, cut the payroll tax and extended unemployment insurance – as supporting recovery. Some also saw the risk of deflation – one of the big concerns ahead of the QE2 plan’s announcement – as “having receded somewhat”.