FED Warns of Fiscal Tightening in 2013

NEW YORK (TheStreet) -- The Federal Reserve warned of fiscal tightening in 2013 if Congress doesn't reach a plan for the federal budget.

The announcement came Wednesday as part of the Federal Open Market Committee meeting in April, as the central bank also stated that it would consider QE3 if the recovery falters.

"Several participants indicated that uncertainty about the trajectory of future fiscal policy could lead businesses to defer hiring and investment," the Fed statement said. "If agreement is not reached on a plan for the federal budget, a sharp fiscal tightening could occur at the start of 2013."

Members stuck to their outlook that U.S. economic growth would continue at a moderate pace and that the unemployment rate would gradually continue to decline.

-- Written by Joe Deaux in New York.

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