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Mar 23, 2015

Fed expected to hike this year, but future path uncertain: Fischer

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.

Mar 20, 2015

Fed handed record $96.9 bln profit to government last year

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.

Mar 18, 2015

Fed bows to market’s more dovish view of soaring dollar

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.

Mar 6, 2015

Jobs report clears way for Fed to flag June rate hike

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.

Mar 5, 2015

Missteps, consolidation eroded New York Fed authority over banks

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.

Mar 4, 2015
via MacroScope

Prescient Yellen saw limits of zero Fed interest rates back in 2009


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.”

Mar 4, 2015
via MacroScope

The more things change: Fed wrestled with same policy “exit” issues in 2009


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.”

Mar 4, 2015
via MacroScope

Transcripts show just how scary things were getting for Yellen and the Fed in 2009


 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).”

Mar 4, 2015

Fed’s Yellen questions whether Wall Street ethics up to par

By Jonathan Spicer

(Reuters) – The head of the U.S. Federal Reserve took a swipe on Tuesday at unlawful and unethical behavior at banks, saying it raises questions over whether the values embedded on Wall Street have improved enough in recent years.

Fed Chair Janet Yellen cited the many improvements since the 2007-2009 crisis at both financial institutions and the U.S. central bank that monitors them. But large banks must continue to fix their internal governance and risk controls, she said, or the Fed will take “swift and meaningful” action.

Mar 2, 2015

Philadelphia Fed names Patrick Harker as Plosser’s successor

March 2 (Reuters) – The Philadelphia Federal Reserve on
Monday named Patrick Harker, one of its directors and the head
of the University of Delaware, as its president and the newest
U.S. monetary policymaker.

Harker, 56, begins the job July 1 and succeeds Charles
Plosser, an outspoken and hawkish Fed official who retired on
Sunday after more than eight years at the helm.