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US economic revival has lost steam, says Federal Reserve

Press Trust of India  |  Washington 

The Federal Reserve has said the pace of US economic recovery has slowed down in the recent months, giving out strong signals that the world's largest economy continues to grapple with its financial woes.

The apex bank's latest comment is one of the most pessimistic in many months.

Despite stimulus programmes running into hundreds of billions of dollars, and key interest rates being held at near-zero levels since December 2008, the US economy remains shaky with soaring unemployment.

"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months," the Fed said on Tuesday.

Reiterating its view on interest rates, the apex bank noted that economic conditions warrant Federal fund rates to remain at the exceptionally low levels for an extended period.

The benchmark rate has been maintained in the range of 0 to 0.25 per cent since December 2008, when the national economy was ravaged by the financial meltdown.

Even though the US has witnessed better growth in the past few quarters, jobless rate remains a major concern. The unemployment rate stood at 9.5 per cent in July and a whopping 1,31,000 jobs vanished last month.

"Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit... Bank lending has continued to contract," the Fed said.

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First Published: Wed, August 11 2010. 18:49 IST