The US Federal Reserve has said the country's economic recovery is still too slow to bring down unemployment, as it repeated its commitment to buy $600 billion in bonds to stimulate growth and create jobs.
After its latest meeting, the Fed issued a statement which contained little acknowledgement of a recent improvement in US economic data. It characterised the US expansion as 'continuing', a modest upgrade from its November description of the recovery as 'slow'.
'The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment,' the statement said.
Early last month, the Fed launched a controversial programme to buy $600 billion in longer-term Treasury securities by the middle of next year to support a weak economic recovery that was failing to generate jobs.
Called QE2, because it is the Fed's second round of so-called quantitative easing through asset purchases, the initiative was attacked by critics concerned it could trigger inflation or set off a round of competitive currency devaluations by weakening the dollar.
Since the central bank launched the programme, data on the economy has turned brighter. Strong November retail sales data today added to evidence the recovery is gaining strength.
In addition, a deal between the White House and congressional Republicans to extend Bush-era income tax cuts included a surprise reduction in payroll taxes, which would provide an unexpected boost for the economy. Some forecasters said the deal could lift growth next year by as much as a full percentage point.
Despite signs the recovery may be picking up steam, the unemployment has hovered near a high 10% for months and core inflation has been running at record lows.
US sales stronger than expected
Official figures show that sales at US retailers rose by more than expected in November as consumers splashed out on clothes and other items at the start of the Christmas season, while takings at petrol stations surged.
The Commerce Department said on Tuesday total retail sales increased 0.8%, rising for a fifth straight month. Sales for October were revised up to 1.7% from a previously reported 1.2% gain.
Economists had expected retail sales to increase 0.6% last month. Compared with November last year sales were up 7.7%. Excluding cars, sales rose 1.2%, beating economists' expectations for a 0.6% gain.
The data were the latest to imply an acceleration in economic growth during the current quarter after output expanded at a 2.5% annual pace in the July-September period.
But it will probably not be strong enough to discourage the Federal Reserve from completing its $600 billion government debt buying programme intended push already low interest rates further down and stimulate demand.
Policymakers from the US central bank are meeting today to assess the economy and are widely expected to stay the course of accommodative monetary policy.
Retail sales last month were buoyed by a 2.7% rise at clothing and clothing accessories stores, the largest increase since March. Consumers also spent on non-essential goods, lifting sales at sporting goods, hobby, book and music stores 2.3%.
Sales were also boosted by a 4% jump in receipts at petrol stations, which was the largest gain in a year. But motor vehicle sales surprisingly fell 0.8%, while building materials dipped 0.1% after rising 3.3% in October.
Core retail sales, which exclude cars, petrol and building materials, rose 0.9% after a 0.5% gain in October. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
