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The Federal Reserve announced Wednesday it would trim another $10 billion from its monthly bond-buying program in August, but cautioned that the labor market still has plenty of room for improvement, bolstering the case for keeping interest rates low.
“A range of labor-market indicators suggests that there remains significant underutilization of labor resources,” the FOMC said in its statement, adding that inflation has risen closer to its goal.
The statement highlighted broader measures of the labor market, such as weak wage growth and underemployment, which Fed Chair Yellen has cited as reasons for maintaining more than five years of near-zero rates.
Gold trimmed losses in the wake of the statement amid speculation that interest rates will remain low for a “considerable time” after bond purchases end.
Gold came under pressure earlier in the session after data showed gross domestic product rose at a 4 percent annualized rate, the most since the third quarter of 2013, after shrinking 2.1 percent from January through March, according to figures from the U.S. Commerce Department. Consumer spending rose 2.5 percent, reflecting the biggest gain in purchases of durable goods in nearly five years.
Meanwhile, a separate report released by the ADP Research Institute in Roseland, New Jersey showed companies added 218,000 workers in July, exceeding the average for the year following a 281,000 increase in June, which was the strongest since November 2012.
Businesses are limiting dismissals and taking on more workers, according to analysts, which in turn is helping to bolster consumer confidence and lay the groundwork for a pickup in household spending.
The ADP report is considered a precursor to Friday’s more important July nonfarm payrolls report, issued by the Labor Department. Friday’s figures are expected to reveal a rise in non-farm payrolls of 230,000 in July versus 288,000 in June.
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Market News Archive
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