"We have not changed policy. We are not tightening policy"
- Federal Reserve Chairman Ben S. Bernanke
Mood among American consumers improved more than initially expected, suggesting the effects of sequester are starting to wane and consumers are feeling more confident about the economic future, survey conducted by the University of Michigan showed Friday. A gauge of consumer sentiment jumped to a seasonally adjusted 85.1 in July, up from 83.9 a month earlier and outpacing analysts' expectations for a 84.0 reading. The index hovered around 89 in five years leading to the last recession, which began in December 2007. During the three-quarter long slump in June 2009, a measure of confidence amid consumers averaged 64.2.
Despite recent tax hikes and budget cuts, the measure remains above 84 for three consecutive months, suggesting the economy is stabilising. Nevertheless, there are signs of weakness, and it may be too early for the Federal Reserve to start tapering its stimulus programme.
Amid growing speculations of possible end of QE, during his two-day long testimony, Bernanke pointed out that the monetary policy will stay loose for the foreseeable future. He also said that short-term borrowing costs will remain near zero level even as the jobless rate fall below 6.5%, especially if decline will be led by people leaving the workforce.
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