WASHINGTON, June 21, 2009 (AFP) – A jittery bond market and economic “green shoots” notwithstanding, the Federal Reserve is likely to reaffirm a commitment to keep pumping money into the economy to battle recession, analysts say.
The Federal Open Market Committee (FOMC) led by chairman Ben Bernanke is expected at a two-day meeting opening Tuesday to maintain its near-zero base interest rate along with a variety of programs providing easy liquidity to the financial system.
Scott Brown, chief economist at Raymond James & Associates, said any shift in policy or emphasis by the Fed could rattle financial markets and imperil a fragile recovery taking root.
“I don’t think the Fed members want to do or say too much,” Brown said. “They don’t want to rock the boat.”
Brown said that at some point the Fed will need to lay the groundwork for reducing its unprecedented stimulus, to avert a surge in inflation, but that “it’s too early to lay much of that groundwork.”
“You are looking at low inflation and a lot slack in the economy,” he said. “The Fed is committed to keeping the lending rate very low for a long time.”
Cary Leahey, senior economist at Decision Economics, said the Fed may take the unusual step of sig