• Tag Archives Federal Reserve

  • Fed Keeps Interest Rates Low, Continues Bond Buying Program

    Posted on by Azrael Comment

    The Federal Reserve held fast to its ultra-accommodative monetary policy Wednesday, solidified by what board members described as an economy weakened by fiscal policy.

    Interest rates will remain at historically low levels while the U.S. central bank will not alter its $85 billion a month asset purchasing program, the Fed’s Open Markets Committee decided at this week’s meeting.

    While recent meetings have been remarkable for signs of dissent over the long-standing Fed policy, the sentiment this month turned towards concerns about “downside risks” to growth, though the FOMC made no mention of the recent set of weak economic data.

    Language in the FOMC statement after the meeting saw one notable change – a declaration that it would increase or decrease the pace of its asset purchases depending on conditions.

    The committee statement passed by an 11-1 vote, with Esther L. George again dissenting over fears that massive Fed money-creation could spur inflation. The central bank’s balance sheet has ballooned to more than $3.3 trillion.

    Full article: http://www.cnbc.com/id/100695681


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  • Federal Reserve was blind to crisis in 2007

    Posted on by Azrael Comment

    Federal Reserve officials were largely unaware of the financial crisis brewing in 2007, until they found themselves in the middle of it, transcripts released Friday show.

    The more than 1,300 pages offer the most comprehensive look at the Federal Reserve’s deliberations, leading up to the start of the Great Recession in December 2007. It’s the central bank’s policy to release full transcripts with a five year lag.

    Here’s how the year played out.

    January 2007: Calm before the storm

    At the beginning of the year, many Fed officials, including Chairman Ben Bernanke, thought one of the biggest risks was that the economy might grow stronger than expected.

    At the time, the Fed’s key interest rate was at 5.25%, and the central bank was leaning toward raising it further, rather than easing monetary policy.

    “My recommendation also is to take no action and to maintain a bias toward further tightening,” Bernanke said at the first meeting of the year, noting that inflation risk had picked up and the housing market had shown some improvement after slumping in 2006.

    “The housing market has looked a bit more solid, and the worst outcomes have been made less likely,” he said.

    At that point, they didn’t realize that losses from subprime mortgages would ignite the deepest financial crisis since the Great Depression.
    Fast forward two months, and still, the Fed thought the worst was over for the housing sector.

    “The central scenario that housing will stabilize sometime during the middle of the year remains intact,” Bernanke said at a meeting in March, adding later, “The effects of the decline in subprime lending may have already been mostly seen, since that has slowed from last fall.”

    Full article: http://money.cnn.com … reserve-transcripts/


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  • Bernanke Wields New Tools to Reduce Unemployment Rate

    Posted on by Azrael Comment

    Chairman Ben S. Bernanke moved the Federal Reserve further into uncharted policy territory in combating joblessness by tying the bank’s interest-rate outlook to unemployment and inflation, while committing to an even faster expansion of the central bank’s balance sheet.

    The actions on the eve of the Fed’s centenary year underscore Bernanke’s hallmark commitment to experimentation and forceful action, derived in part from his research showing too little monetary stimulus produced large economic costs for the U.S. in the 1930s and for Japan in the 1990s. He called the current state of the labor market, with unemployment at 7.7 percent, “an enormous waste of human and economic potential” and said the benefits of more bond buying outweigh the potential risks.

    “Bernanke is pulling out all the stops to kick this economy back into a higher gear,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are buying everything in sight — Treasuries, mortgage-backed securities — and will keep rates low until everyone who wants a job has one.”

    Bonds fell yesterday on the prospect of higher inflation after policy makers boosted their main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion in mortgage debt a month. That decision puts the Fed’s $2.86 trillion balance sheet on track to reach almost $4 trillion by the end of next year.

    The yield on the 10-year note was little changed today, and traded at 1.69 percent at 9:13 a.m. in London. The yield on the 30-year Treasury bond rose one basis point to 2.896 percent.

    Full article: http://www.bloomberg … employment-rate.html


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