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US Federal Reserve to continue with QE2 plan

The Federal Reserve is set to continue with the second round of its quantitative easing programme as it is not convinced by the signs of improvement in the US economy.

According to the Fed minutes from December 14, 2010, the Fed did acknowledge the improving outlook but said the $600bn programme would continue with “the pace and size of the overall purchase programme” being dependant on the strength of the recovery.

The notes state that: “Some members indicated that they had a fairly high threshold for making changes to the programme,”

“While the economic outlook was seen as improving, members generally felt that the change in outlook was not sufficient to warrant any adjustments.”

The Fed has highlighted the 10 per cent unemployment as a particular concern, as well as the housing market and consumer spending in poorer households.

The notes said: “There were indications that retail spending by middle and lower-income households had risen less than spending by high-income households, suggestive of ongoing financial pressures on those of more modest means.”

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