The Federal Reserve wants to see steadier signs of expansion before reducing its $ 85 billion monthly purchases of Government-backed bonds, the US central bank said on Wednesday.

In a monetary policy statement, the Fed’s rate-setting Open Market Committee saw “growing underlying strength in the broader economy” but was awaiting “more evidence that progress will be sustained before adjusting the pace of its purchases.”

In its first regular meeting in Washington since the end of the October 1-16 partial Government shutdown, the Fed said it would continue reinvesting principal from Treasury notes and bonds issued by Government-backed mortgage lenders into the same securities.

“Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at (the Federal Reserve’s long-term target of 2 per cent annually.)”

The so-called quantitative easing of monetary policy has fueled a booming stock market and pushed money out of the safe haven of the US Government in an attempt to boost investment into the private economy.

The Fed announced months ago that it was eying an eventual withdrawal of such extraordinary measures but has yet to act. Acting too fast could send the still-fragile US economy into recession, but failing to tighten could inflate destabilising speculative bubbles or spark inflation.

Another US political crisis over spending and borrowing looms in early 2014, when the temporary measures implemented on October 17 are due to lapse.

Consumer prices rose a seasonally adjusted 0.2 per cent in September in the United States due largely to a jump in energy prices, the Bureau of Labour Statistics reported earlier on Wednesday.

The consumer price index was up 1.2 per cent for the last 12 months. So-called core inflation, which excludes volatile food and energy prices, rose by a seasonally adjusted 0.1 per cent in September.

The September inflation data was delayed from its scheduled October 16 release, due to a partial Government shutdown over a budget stalemate in Congress. Third-quarter gross domestic product, which was due to be reported on Wednesday, was postponed until November 7.

The Fed has kept its benchmark interest rates at an unprecedented near-zero since December 2008.

On September 18, the Fed said it expected to maintain the “exceptionally low” interest rate as long as unemployment was above 6.5 per cent and inflation expectations were around 2 per cent.

September unemployment was 7.2 per cent.

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