Fed says ‘modest to moderate’ growth spurred by home, car sales

‘Steady Pace’

“The economy is growing at a steady pace,” said Thomas Costerg, an economist with Standard Chartered Plc in New York.

“It’s not accelerating, but it’s still healthy,” he said before release of the Beige Book. “We’re not seeing a deterioration, and the data are good but not great.”

Employers probably added more workers last month, and the jobless rate held at a more than four-year low of 7.4%, economists said before a report Sept. 6 report on employment. Payrolls rose by 180,000 following a 162,000 gain the prior month, according to the median forecast of 71 economists surveyed by Bloomberg before release of Labor Department data.

Faster hiring and income gains would underpin consumer spending, which accounts for about 70% of the economy.

Fed Chairman Ben S. Bernanke and his colleagues have pledged for almost a year to press on with asset purchases until the labor market shows substantial improvement. Their buying of Treasuries and mortgage-backed securities have expanded the Fed balance sheet to $3.64 trillion.

Job Growth

While payroll growth in July decreased to 162,000, the average over the past six months was 200,000. Boston Fed president Eric Rosengren and Chicago’s Charles Evans, both voting members of the FOMC this year who have consistently supported increased stimulus, have cited job growth of 200,000 as a benchmark for labor-market improvement.

The FOMC this month will probably begin to reduce its bond buying, according to 65% of economists surveyed by Bloomberg. Its first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, according to the median estimate in a survey of 48 economists conducted Aug. 9- 13. The Fed will probably end the buying by mid-2014, they said.

Speculation the Fed will pare its bond purchases has pushed up borrowing costs to two-year highs. The average rate on a 30- year, fixed-rate mortgage has increased to 4.51% from a record-low 3.31% in November, according to Freddie Mac. The yield on the benchmark 10-year Treasury note hit a two-year high of 2.93% Aug. 22.

The 20 most-traded emerging-market currencies have weakened 8% this year as the Fed’s potential paring of stimulus lures away capital.

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