James Politi
Financial Times
August 9, 2010

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The Federal Reserve is set to downgrade its assessment of US economic prospects when it meets on Tuesday to discuss ways to reboot the flagging recovery.

Faced with weak economic data and rising fears of a double-dip recession, the Federal Open Market Committee is likely to ensure its policy is not constraining growth and to use its statement to signal greater concern about the economy. It is, however, unlikely to agree big new steps to boost growth.

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Smaller measures to help the economy could initially take the form of a decision to reinvest proceeds from maturing mortgage-backed securities held by the US central bank, thereby preventing the Fed’s balance sheet from shrinking naturally.

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