Tagged: Fedral Reserve

ECB to hold fire, Fed loads second stimulus round

Yahoo | AFP | 31/10/2010

The European Central Bank governing council meets this week after European leaders moved to shore up eurozone stability and as the US Federal Reserve mulls a second round of monetary stimulus. The ECB is sure to maintain its main lending rate at a record low of 1.0 percent, analysts say, while focusing potentially tense talks on whether to continue unwinding its own unconventional measures.

euro-unionA rift between ECB governors has opened over pursuing purchases of eurozone government debt, with German central bank chief Axel Weber saying he will stick to his guns even if it means passing on a chance to be the next ECB president. Weber insists the scheme should be phased out and said last week: "If that’s going to have implications for my future career, then I’d be happy to live with those consequences."

Commerbank economist Michael Schubert said: "Behind closed doors … the council is likely to discuss how to continue its gradual exit from unconventional measures" some eurozone banks have come to depend upon. "Discussions could become even more heated at Thursday’s meeting," he added.

Growth in powerhouse Germany is strong now but Greece is still in recession and faces an unsettled political situation that could worsen its debt crisis. In London meanwhile, the Bank of England is expected to maintain its main interest rate at a record low of 0.50 percent on Thursday.

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Fed officials in no hurry to raise rates

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.     

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Fed raises rate banks pay for emergency loans

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