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US Federal Reserve leaves stimulus unchanged

The US Federal Reserve has said it will continue buying bonds at an $85 billion monthly pace against wide expectations that it would be reduced. However, Fed policymakers did cut growth forecasts for this year and 2014.

The US Federal Reserve on Wednesday left its $85 billion a month stimulus program in place (63.6 billion euros). The Fed decided against the tapering of asset purchases, citing strains in the economy from tight fiscal policy and higher mortgage rates.

The move came as a surprise for financial markets that were braced for a reduction in the central bank's economic stimulus. The bond purchases are intended to keep long-term loan rates low to encourage borrowing and spending.

"The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the US central bank said in a statement.

"Conditions in the job market today are still far from what all of us would like to see," Chairman Ben Bernanke said at a news conference shortly after the statement was released. Bernanke also said the Fed could still decide to begin cutting its stimulus program later in the year if the economy keeps growing.

However, Fed policymakers instead cut their growth forecast and now see growth in a 2 percent to 2.3 percent range this year, down from 2.3 percent to 2.6 percent from June estimates. The downgrade for 2014 was even sharper with 2.9-3.1 percent from 3.0-3.5 percent.

The Fed also said that it plans to keep its key short-term interest rate near zero until unemployment falls to 6.5 percent, which it projects could happen by late 2014. The latest US unemployment figure is 7.3 percent from last month.

hc/jr (Reuters, AFP, AP, dpa)