NEW YORK (Reuters) – The Federal Reserve should be willing to let inflation temporarily run above its target level so as to more quickly bring the economy back to health, a top Fed official said on Friday, even as a second policymaker signaled the very idea left him cold.
The debate, between Chicago Fed President Charles Evans and Philadelphia Fed President Charles Plosser, underscored a fundamental disagreement over the central bank’s optimal approach to policy under new Fed Chair Janet Yellen.
NEW YORK (Reuters) – Financial market turbulence will likely return when the Federal Reserve decides to hike interest rates, top U.S. economists said in a paper that warns of the potential consequences of the Fed’s extraordinary stimulus program.
The paper, released on Friday, focused on a financial market selloff in mid-2013 after Fed officials said they planned to trim monthly bond-buying. The authors argued that investors in mutual funds, though unleveraged relative to banks, showed signs they could destabilize markets in a rush to sell. This amounts to a hidden risk for the Fed, as central bank monitoring of financial market stability sometimes focuses on the degree to which trades are based on borrowed money.
WASHINGTON (Reuters) – U.S. homebuilder confidence suffered its largest one-month drop ever in February, heightening concerns that recent signs of weakness in the economy reflect deeper problems than the severe weather that has gripped much of the country.
The National Association of Home Builders said on Tuesday its Housing Market Index plunged by 10 points to 46 in February, with a majority of builders seeing market conditions as poor.
WASHINGTON, Feb 14 (Reuters) – Economic policymakers from
the world’s biggest economies will focus on recent financial
market turbulence when they meet next week in Sydney, a senior
official at the U.S. Treasury said on Friday.
Finance ministers and central bankers from the Group of 20,
which brings together the world’s biggest economies and acts as
a steering committee for global economic policy, will meet Feb.
22-23 in Australia.
WASHINGTON (Reuters) – The Obama administration made it easier on Friday for banks to do business with licensed marijuana companies with less fear of prosecution, further encouraging U.S. states that are experimenting with legalization of the drug.
The Justice and Treasury departments were in the process of outlining the policy in writing to federal prosecutors and financial institutions. The guidance would stop short of promising immunity for banks, but make clear that criminal prosecution for money laundering and other crimes was unlikely if they met a series of conditions, officials said.
WASHINGTON (Reuters) – Janet Yellen, fresh from taking the helm of the Federal Reserve, made it clear on Tuesday she would not make any abrupt changes to U.S. monetary policy, saying the central bank was on track to keep reducing its stimulus even though the labor market recovery was far from complete.
In her first public comments since becoming Fed chief earlier this month, Yellen had testy exchanges with some Republican lawmakers over Wall Street regulation and central bank independence. But she managed to keep financial markets calm by emphasizing continuity with the policy approach taken by her predecessor, Ben Bernanke.