The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

The Fed suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate.

Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

The Fed also released the results of stress test late on Tuesday. Of the 19 largest banks tested, 15 managed to pass the test meaning that they had sufficient reserves to avert a credit crisis similar to the one that was witnessed 4 years ago.

Arcelor Mittal in its annual report for 2011 has mentioned that contrasting patterns of demand were noted in the European and US demand. The company has said that global steel market continued to build on slow recovery last year. Destocking in latter half of 2011 affected the apparent steel demand that grew by 6.4%.

China and Europe witnessed the destocking. Crude steel production increased by 6.8% to 1527 million tons. This was significantly lower than 2006 and 2007.

In raw materials, Iron ore prices peaked to $ 190 per ton in February 2011. Continuing expectations of growth in demand of steel raised the stakes for Iron ore. Floods in Australia affected the world coking coal prices that jumped by more than $ 300 per ton. As a result the first quarter 2011 world apparent demand for steel was up by 10% excluding China. However, after the first quarter steel demand remained stable till the second quarter.

End of third quarter saw shift in sentiments. The Eurozone debt crisis intensified that derailed the Iron ore prices and started destocking in Europe. Meanwhile, US steel inventories remained 25% below the peak of 2008.

Destocking was more limited in US and demand remained strengthening. This reflected in the prices of HRC (Hot Rolled Coils) that were more than $120 a ton in US Midwest compared to Germany.

First half of 2011 was good for China where the domestic steel production reached a all time peak of 725 million tons. However by the start of Q4 government measures to curb inflation and cool overheated private real estate market were having a negative impact.

Apparent demand declined severely in the final quarter coupled with falling Iron ore prices. In Japan, disruptions due to earthquake and Tsunami caused a fall in apparent demand.

In 2012, US demand is projected to grow due to rise in automotive, energy and equipment segment.

European outlook remains subdued with uncertainty relating to debt crisis. Export of automotives will continue to perform in Europe but that will be offset by weak domestic demand. Chinese demand is expected to grow in the second quarter on relaxing government initiatives to stimulate demand.

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