Wednesday, November 2, 2011

Fed lowers GDP forecast, holds policy steady

The US Federal Reserve left monetary policy on hold and offered a moderately brighter economic outlook, but flagged risks to growth that appeared to leave open the door for further easing.

"Economic growth strengthened somewhat in the third quarter," the Fed said in its post-meeting statement. "There are significant downside risks to the economic outlook, including strains in global financial markets."

However, Charles Evans, president of the Chicago Fed, dissented against the decision because he believed the central bank should take additional policy action at this meeting.

The Fed did not offer any hints that it was considering additional purchases of mortgage-backed securities or a major overhaul in its communications policies, two options that appeared to be on the table.

Hinting that further bond purchases remain an option, the central bank reiterated that it was prepared to adjust its balance sheet as needed to foster recovery.

Analysts will get more clarity on the Fed's outlook for the economy when the Fed releases quarterly economic forecasts at 2 p.m. (1800 GMT), followed shortly after by a news conference with Fed Chairman Ben Bernanke.