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Fed stands by stimulus, sees stronger U.S. economy

The Federal Reserve said yesterday that the U.S. economy has strengthened but still needs the Fed’s extraordinary support to help lower high unemployment.

In a statement after a two-day meeting, the Fed stood by its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent, as long as the inflation outlook remains mild. And it said it would continue buying $85 billion a month in bonds indefinitely to keep long-term borrowing costs down.

Chairman Ben Bernanke stressed that while the economy has improved, the Fed won’t ease its aggressive stimulus policies until it’s convinced the economic gains can be sustained. An unemployment rate of 6.5 percent is a threshold, not a “trigger,” for a possible rate increase, he said.

Bernanke also said the Fed might vary the size of its monthly bond purchases depending on how much the job market improves. The unemployment rate has fallen to a four-year low of 7.7 percent, among many signs of a healthier economy.

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