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Factory orders rise less than expected in July

September 03, 2009|Neil Irwin

WASHINGTON — Federal Reserve leaders became more confident this summer that the economy was stabilizing, even as they remained worried about the weak job market.

According to minutes of the Fed's August policymaking meeting released Wednesday, top officials of the central bank "agreed that the incoming data and anecdotal evidence had strengthened their confidence that the downturn in economic activity was ending and that growth was likely to resume in the second half of the year."

But even as they expected the economy to produce more goods and services, the Fed officials saw continued weakness in employment.

"Conditions in the labor market remained poor, and business contacts indicated that firms would be quite cautious in hiring when demand for their products picks up," the document said.

Moreover, Federal Open Market Committee members thought it was likely that factors including falling incomes and difficulty in getting loans would "weigh on consumer spending," potentially making the recovery soft in its initial months. "They expressed a range of views, and considerable uncertainty, about the likely strength of the upturn," the minutes said.

Fed officials chose to leave their target for short-term interest rates near zero and to keep language in an accompanying statement suggesting that rates would be left at that level "for an extended period."

They did take a first step toward unwinding the Fed's extensive interventions in the economy, indicating that an effort to buy $300 billion in Treasury bonds would be allowed to taper off by the end of October.

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Irwin writes for the Washington Post.

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