Jobs, factory, inflation data favor easy Fed policy

Thu Feb 21, 2013 11:32am EST
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By Lucia Mutikani

WASHINGTON (Reuters) - More Americans filed new claims for jobless aid last week, factory activity slowed in February and consumer prices were flat in January, supporting the argument for the Federal Reserve to maintain its very accommodative monetary policy stance.

The reports come after signs of divisions at the Fed over its bond buying program aimed at stimulating the sluggish economic recovery.

"If the Fed is looking for evidence to keep their foot to the floor on policy, they are still getting it," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 362,000, unwinding the bulk of the prior week's decline, the Labor Department said.

It said in a second report that consumer prices were flat for a second consecutive month in January as gasoline prices fell and food costs were unchanged after several months of gains.

In the 12 months through January, consumer prices rose 1.6 percent, the smallest gain since July. They had advanced 1.7 percent in December.

Concerns over tepid job growth prompted the U.S. central bank last year to embark on an open-ended bond buying program.

It said it would keep up the program, which it hopes will push down borrowing costs, until it saw a substantial improvement in the outlook for the labor market.   Continued...

A woman fills out an application for one of the 300 available positions at a new Target retail store in San Francisco, California August 9, 2012. REUTERS/Robert Galbraith