NEW YORK (Reuters) – The New York Federal Reserve officials tasked with prying interest rates off the floor have been meeting with bankers and traders to plot how best to do it, amid deep uncertainty over how much control they will really have over short-term lending markets.
With the U.S. central bank expected to raise rates later this year, Simon Potter and his team of market technicians have the tricky job of implementing higher rates using some new and lightly tested tools as well as some that may not work as well as in the past. They’ll be operating under intense global scrutiny that’s centred on the prospects for the world’s biggest economy.
NEW YORK, March 26 (Reuters) – The New York Federal Reserve
officials tasked with prying interest rates off the floor have
been meeting with bankers and traders to plot how best to do it,
amid deep uncertainty over how much control they will really
have over short-term lending markets.
With the U.S. central bank expected to raise rates later
this year, Simon Potter and his team of market technicians have
the tricky job of implementing higher rates using some new and
lightly tested tools as well as some that may not work as well
as in the past. They’ll be operating under intense global
scrutiny that’s centered on the prospects for the world’s
NEW YORK (Reuters) – The Federal Reserve is “widely expected” to begin raising interest rates this year though the path remains uncertain, with policymakers deciding subsequent policy moves on a meeting-by-meeting basis, a top Fed official said on Monday.
Stanley Fischer, the Fed’s second-in-command, appeared to lay the groundwork for a less predictable future of monetary policy, where economic data and unexpected geo-political risks could prompt the Fed to raise, or lower rates on the run.
NEW YORK, March 20 (Reuters) – The Federal Reserve handed
$96.9 billion to the U.S. Treasury last year, audited financial
statements showed on Friday, a record payday for the U.S.
government thanks to interest on the central bank’s massive
stable of assets.
The interest in 2014 totaled $115.9 billion on the Treasury
and mortgage bonds the Fed has purchased over three rounds of
bond-buying, which were meant to stimulate the U.S. recovery
from a 2007-2009 recession. The Fed’s 12 reserve banks held $4.5
trillion at year end, up $500 billion from 2013.
NEW YORK/SAN FRANCISCO (Reuters) – The Federal Reserve’s back-pedaling on how aggressively it plans to raise interest rates acknowledges that the more dovish financial markets were right all along: turns out, the soaring dollar has stalled its policy-tightening plan.
The U.S. central bank’s far more modest inflation predictions, released on Wednesday, suggest that the strong currency and sagging oil prices are spooking policymakers more than they have let on. It sets the stage for later rate hikes than they expected, but which many investors have long anticipated.
NEW YORK, March 6 (Reuters) – America’s tumbling
unemployment rate and better-than-expected job gains in February
should give Federal Reserve officials confidence to pave the way
this month, though not commit, to an interest rate hike in June.
Data released Friday showed that unemployment dropped to a
six-year low of 5.5 percent last month, within the range the Fed
considers to be full employment, suggesting that winter weather
does not appear to be derailing the economy as it did last year.
NEW YORK (Reuters) – The New York Federal Reserve’s once-unparalleled authority to oversee Wall Street has been weakened by a series of supervisory missteps and by a consolidation of power at the U.S. central bank’s Washington headquarters.
Current and former New York Fed employees say its ability to independently regulate the country’s largest banks began to deteriorate after the financial crisis, and got worse once U.S. Congress passed its landmark Dodd-Frank reform bill, prompting the Washington-based Federal Reserve Board of Governors to take a more active role.
Despite the Federal Reserve’s trillions of dollars in newly printed money, workers’ wages and overall U.S. inflation have failed to take off since the recession. Longer-term borrowing costs, from 10-year Treasury yields to 30-year home mortgages, have also compressed without any real signs of reversing. While this has perplexed many economists, transcripts of the U.S. central bank’s crisis-fighting meetings in 2009 show that Janet Yellen, then the head of the San Francisco Fed, was prescient in warning colleagues of these very problems.
“The bottom line is that we are faced with a situation in which inflation is undesirably low, and, even with large monthly employment gains, the level of resource slack will remain high for an extended period,” she said at a meeting in December of that year, when unemployment was nearly 10 percent and inflation was near zero. “In my forecast, the zero bound (for the Fed’s key interest rate) and the limits on unconventional policy constrain us from pursuing a more desirable and more expansionary policy for some time to come.”
The Federal Reserve faces two big challenges in the months and years ahead: how to finally “liftoff” after more than six years of rock bottom interest rates, and how to begin drawing down its $4.5-trillion balance sheet after three massive rounds of bond purchases. But, it turns out, those questions were being raised at the U.S. central bank as far back as 2009.
That year the Fed was experimenting with what would be its first round of bond-buying known as quantitative easing, or QE. According to transcripts of its June meeting, staff made two presentations on an “exit strategy” from the unconventional accommodation, with then Fed Chairman Ben Bernanke telling colleagues: “I promised we would focus today a good bit on our exit strategy, that is, on how we’re going to unwind the policies that we have put in place.”
The U.S. Federal Reserve just released full transcripts of its crisis-fighting meetings of 2009, when the U.S. economy was in the depths of recession and unemployment was soaring to 10 percent. Janet Yellen, who at the time was head of the San Francisco Fed, gave a sense of just how scary things were getting:
“The economic and financial news has been grim,” she told colleagues at a mid-March policy meeting, according to the transcripts. “Things are now so bad that I actually open the Greenbook with greater trepidation than my 401(k).”