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Fed keeps stimulus, says taxes and cuts have hurt

WASHINGTON — The Federal Reserve on Wednesday stood by its aggressive efforts to stimulate the economy and reduce unemployment. And it sent its most explicit signal to date that tax increases and spending cuts that kicked in this year are slowing the economy.

“Fiscal policy is restraining economic growth,” the Fed said in a statement after a two-day policy meeting.

The Fed maintained its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. And it said it will continue to buy $85 billion a month in Treasury and mortgage bonds. The bond purchases are intended to keep long-term borrowing costs down and encourage borrowing and spending.

In its statement, the Fed made clear that it could increase or decrease its bond purchases depending on the performance of the job market and inflation.

David Jones, chief economist at DMJ Advisors, said that in saying it could increase or decrease its bond purchases, the Fed wants to show flexibility: It’s ready to respond, whether the economy improves or weakens significantly.