Reuters | Aug 28, 2010 | 4:09am IST
U.S. Federal Reserve Chairman Ben Bernanke said on Friday the economic recovery has weakened more than expected and the Fed stands ready to act if needed to spur slowing growth. Bernanke downplayed concerns that the economy might slip back into recession, predicting a modest expansion in the second half of this year, with the pace picking up in 2011. Otherwise, he said the Fed has sufficient ammunition left and could support growth by purchasing more government debt or by promising to keep rates exceptionally low for a longer period than currently priced in by financial markets. Bernanke’s comments, in an address to an annual conference of global central bankers hosted by the Fed in Jackson Hole, Wyoming, came as the government reported the economic growth rate in the second quarter was weaker than it had originally estimated. Bernanke made clear that the U.S. central bank has not decided what would prompt additional easing. "The overall tone was one of watch and wait," Goldman Sachs economist Jan Hatzius wrote in a note to clients, "despite ongoing signs that U.S. economic activity has not only dropped below its potential growth rate but has a significant probability of weakening further."
While Bernanke focused on near-term issues in the U.S. economy, the head of the European Central Bank, Jean-Claude Trichet, also speaking at the Jackson Hole conference, addressed long-term global challenges. He urged governments and central banks to ensure that the transition from very high debt levels incurred in response to the global financial crisis and its economic fallout takes place in an orderly fashion and without compromising economic growth. "The primary macroeconomic challenge for the next 10 years is to ensure that they do not turn into another ‘lost decade,’" Trichet told the conference. In Japan, which has experienced decades-long stagnant growth, the Bank of Japan is examining holding an emergency meeting early next week to ease monetary policy as the strong yen threatens the country’s fragile economic recovery, a source familiar with the matter said. An emergency meeting may be held as early as Tuesday.
Bloomberg | Jul 31, 2010 | 2:29 AM GMT+0530
Nomura Holdings Inc., one of the 18 primary dealers that trade with the Federal Reserve, said policy makers will “ease” at their Aug. 10 meeting, though what form it takes is debatable. Central bankers may change the language of their policy statement to signal that the Fed’s balance sheet will remain expanded and change policy on the mortgage program to start reinvesting paydowns, the firm said in a note to clients today. There is also a chance of other actions, such as a cut in the rate on excess reserves, Nomura’s global economics team said. Nomura changed its viewpoint because of a softening of the comments from policy makers such as Philadelphia Fed President Charles Plosser and St. Louis Fed President James Bullard. The firm also cited the Fed’s downward revision for growth and the slack in the economy that threatens to push inflation to an unacceptably low level for Fed Chairman Ben S. Bernanke.
“Easing is going to be very seriously considered given several months of disappointing data and the very dovish tone of public commentary across the spectrum,” said Zach Pandl, an economist at Nomura Securities International in New York. “If the Fed is averse to buying more assets, then cutting the rates of interest on reserves could be the next option.” Bullard said yesterday that the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero.
Reuters | Wed Mar 24, 2010 | 12:17pm IST
With unemployment high and inflation low, the Federal Reserve is in no hurry to raise interest rates, two Federal Reserve officials suggested on Tuesday. The Fed cut its key target rate to near zero in December 2008 and pumped more than $1 trillion into the world’s biggest economy to blunt the worst downturn since the Great Depression. While a mild recovery has taken hold and the jobs market has begun to stabilize, the officials said scant signs of inflation mean the Fed’s vow to keep near-zero rates for an extended period continued to be warranted. "Such an accommodative policy is currently appropriate, in my view, because the economy is operating well below its potential and inflation is subdued," San Francisco Federal Reserve President Janet Yellen said at a Town Hall Los Angeles luncheon. "I don’t believe this is yet the time to be tightening monetary policy."
Earlier on Monday in Shanghai, Chicago Federal Reserve Bank President Charles Evans said he believed the Fed’s "extended period" language means no change to rates for at least three to four meetings of the policy-setting Federal Open Market Committee — or about six months. "I’m hopeful that businesses will be surprised by the strength of demand over the next year and that they will actually begin to add workers, but it is quite a cautionary prospect for the US and that leads me to think that monetary policy is likely to continue to be accommodative for an extended period of time," said Evans, who is not a voting member of the Fed’s policy-setting committee this year.
AP | MSN News | Feb. 18, 2010 | 5:51 pm ET
The Federal Reserve decided Thursday to boost the rate banks pay for emergency loans. The action is part of a broader move to pull back the extraordinary aid it provided to fight the worst financial and economic crisis since the 1930s. The move won’t directly affect borrowing costs for millions of Americans. But with the worst of the financial crisis over, it brings the Fed’s main crisis lending program closer to normal. The Fed decided to bump up the so-called “discount” lending rate by one-quarter point to 0.75 percent. The increase takes effect Friday.
The central bank said the action should not be viewed as a signal that it will soon boost interest rates for consumers and businesses. Record-low borrowing costs near zero are still needed to foster the recovery, it said. The Fed repeated its pledge to keep interest rates at “exceptionally low” levels for an “extended period.” The Fed had signaled for weeks that an increase in the discount rate was coming. It made its announcement Thursday after the financial markets had closed. Investors, however, viewed the bump-up in the emergency lending rate as a step toward broader credit tightening. In after-hours trading, the dollar strengthened, yields on two-year Treasury securities rose and stock futures dipped. Continue reading