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Jan 16, 2015

Unfazed by market swings, Fed sticks to mid-2015 hike scenario

NEW YORK/SAN FRANCISCO, Jan 16 (Reuters) – Tumbling oil
prices have strengthened rather than weakened the Federal
Reserve’s resolve to start raising interest rates around midyear
even as volatile markets and a softening U.S. inflation outlook
made investors push back the timing of the “liftoff.”

Interviews with senior Fed officials and advisors suggest
they remain confident the U.S. economy will be ready for a
modest policy tightening in the June-September period, while any
subsequent rate hikes will probably be slow and depend on how
markets will behave.

Jan 14, 2015

Fed’s Kocherlakota ‘uneasy’ about low longer-term rates

NEW YORK, Jan 13 (Reuters) – A top U.S. Federal Reserve
official said on Tuesday he was “uneasy” about the low long-term
yields on Treasury bonds because the situation indicates there
are fewer safe assets for investors, and it suggests rates could
be persistently low in the future.

Minneapolis Fed President Narayana Kocherlakota said the
puzzlingly low rates could complicate options as the U.S.
central bank prepares to tighten policy. But he added the Fed
would have to consider the bond-market reaction to an eventual
rate hike only to the extent that it affects the real economy.

Jan 13, 2015

Fed’s Kocherlakota backs goal-based policy, wants more stimulus

NEW YORK (Reuters) – Proposed U.S. legislation that would force the Federal Reserve to adopt a rules-based approach to policy is flawed, a top Federal Reserve official said on Tuesday, arguing that a goal-oriented approach is better and would suggest more stimulus is necessary.

Narayana Kocherlakota, the dovish president of the Minneapolis Fed, repeated his long-held argument that the U.S. central bank is planning a too-hasty retreat this year from near-zero interest rates.

Jan 11, 2015

Mind the gap in multi-speed world economy after oil plunge

WASHINGTON/NEW DELHI, Jan 11 (Reuters) – Robust recovery in
the United States, a moribund euro zone and slowing Chinese
growth reflect global splits which plunging oil prices are
likely to widen.

On the face of it, lower energy bills should give consumers
and companies more money to spend and boost economic growth, at
least for oil importers.

Jan 9, 2015
via MacroScope

Major central banks set to go their own way, with some risk

Real interest rates of world’s major central banks

The world’s major central banks have long followed the same general flight path, guided by the economic winds of growth, inflation and financial markets. It has worked pretty well for policymakers in the United States, Europe, Japan, and the United Kingdom: moving together to tighten or loosen monetary policy makes things more predictable for citizens, businesses and investors. It also serves as buffer to any volatile currency movements, at least among developed economies. But six years after the worst recession in decades, this could be the year central bankers split off and – with some risk – go their own way.

While the U.S. Federal Reserve and Bank of England are expected to raise interest rates in the next 6-12 months or so, emboldened by strong jobs growth in their respective countries, the European Central Bank and Bank of Japan are headed for yet more monetary stimulus to fend off deflation and stagnant growth. Plunging oil prices, while good in principle for these importing economies, is nonetheless unwelcome for ECB and BoJ policymakers trying desperately to boost prices with low rates and massive asset purchases. Boston Fed President Eric Rosengren, speaking in Wisconsin on Thursday, noted that the ECB is expected to expand its balance sheet later this month. Taking stock of the four central banks, he said:

Dec 31, 2014

Fed forecasting tool calls for immediate rate hike, Plosser says

By Jonathan Spicer

(Reuters) – A forecasting tool developed by the Federal Reserve recommends that U.S. interest rates should be hiked immediately to keep pace with the improving economy, according to a paper by the soon-to-retire Philadelphia Fed President Charles Plosser.

Plosser, among the minority of hawkish monetary policymakers, co-published research showing the Fed-developed model calls for rates to jump from near zero to 0.5 percent in the fourth quarter of 2014, and to rise to 1.1 percent by the second quarter of 2015.

Dec 17, 2014

Despite dissents and high stakes, Yellen delivers clear Fed message

SAN FRANCISCO/NEW YORK, Dec 17 (Reuters) – Federal Reserve
Chair Janet Yellen pulled off a tricky policy transition on
Wednesday, clearly telegraphing that interest-rate hikes are
approaching even while three of her colleagues at the U.S.
central bank objected to her new message.

The Fed has been slammed for sloppy communications in the
past, especially after then-Chairman Ben Bernanke accidentally
set off a global market rout last year.

Dec 16, 2014

Russian turmoil unlikely to slow Fed’s cruise to first rate hike

Dec 16 (Reuters) – The U.S. Federal Reserve stared down a
volatile global economy in October to keep its plans for an
eventual interest rate hike on track, and is likely to do so
again this week amid plunging oil prices and a potential
currency crisis in Russia.

The dramatic fall in Russia’s rouble underscored how the oil
collapse is shifting wealth and economic expectations around the
world, creating a more volatile environment for the U.S. central
bank as it prepares to lift rates that have been near zero for
six years.

Dec 15, 2014

Government seeks to lock in budget goals as election nears

NEW YORK/POOLE, England (Reuters) – Britain’s government promised on Monday to put its ambitious budget targets on a more formal footing, in a largely political move by Conservative Chancellor George Osborne to embarrass the opposition Labour party.

Cutting Britain’s budget deficit has been the main economic goal of the coalition government since it came to power in 2010, and Osborne wants to keep it at the top of the agenda in the run-up to a national election in May 2015.

Dec 15, 2014

Preview – Fed faces big decision over a few choice words

NEW YORK (Reuters) – Federal Reserve officials will decide this week whether to make a critical change to their policy statement that would widen the door for interest rate hikes next year and effectively bet the United States will continue to shine in a gloomy global economy.

In one of the last major wild cards for financial markets in 2014, the U.S. central bank’s policy-setting committee is to issue the statement and fresh economic forecasts on Wednesday at 2 p.m. (1900 GMT), following a two-day meeting. Fed Chair Janet Yellen will then hold a news conference at 2:30 p.m. (1930 GMT).