WASHINGTON (Reuters) – Watch what Federal Reserve officials do, not what they say. That was Wall Street’s reaction to the U.S. central bank’s hints that it could soon begin to wind down its bond-buying stimulus.
Rather than heed Fed Chairman Ben Bernanke’s reassurance that the end of quantitative easing would not presage an imminent rise in interest rates, the bond market pushed borrowing costs sharply higher, a sign the central bank’s reliance on “forward guidance” may not be working as intended.
As Federal Reserve Chairman Ben Bernanke delivered what may have been his last testimony on monetary policy before Congress, most of the world’s attention was focused on what hints he might give about the timing of an eventual reduction in the pace of asset purchases.
Tucked in the actual semi-annual monetary policy report Bernanke delivered to lawmakers on Capitol Hill was a little-noticed reference to growing worries about the potential for an extended period of low savings, associated in part with long-stagnant wages, to thwart long-run economic progress.
BUENOS AIRES, July 11 (Reuters) – The export price of
Argentine soyoil has plummeted 21 percent so far this year, due
to new European biodiesel tariffs, putting one of the country’s
key industries at risk at a time of uncertainty in Latin
America’s third biggest economy.
With annual inflation running at 25 percent and investment
flows reduced by confidence-sucking foreign exchange and import
controls, the government needs all the farm-related tax revenue
it can get.
Post corrected to show Brooksley Born is a former head of the Commodity Futures Trading Commission (CFTC) not a former Fed board governor.
Underlying the Federal Reserve recent announcement on new capital rules was a general sense of “mission accomplished.” The U.S. central bank, also a key financial regulator, has finally implemented requirements that it says could help prevent a repeat of the 2008 banking meltdown by forcing Wall Street firms to rely less heavily on debt, thereby making them less vulnerable during times of stress.
Credit to Barclays economists for coining the term ‘Septaper’
A solid U.S. employment report for June appears to have cemented market expectations that the Fed will begin to reduce the pace of its bond-buying stimulus in September. Average employment growth for the last six months is now officially above 200,000 per month.
Never mind that, even at this rate, it would take another 11 months for the job market to reach its pre-recession levels – and that’s not counting the population growth since then.
President Barack Obama proposed a hike in the U.S. minimum wage during his State of the Union Address in February. Since then, we haven’t really heard very much about the proposal. That’s too bad for a U.S. economy that could still use a bit of a boost, according to new research.
A paper from the Chicago Fed finds that, while there might be little impact on long-term growth prospects from a higher minimum wage, the measure could add as much as 0.3 percentage point to gross domestic product in the short-run. That’s not insignificant for an economy that expanded at a soft annualized rate of just 1.1 percent over the last two quarters.
Surprise! Euro zone unemployment was stuck at record high of 12.2 percent in May, with the number of jobless quickly climbing towards 20 million. Still, as accustomed to grim job market headlines from Europe as the world has become, it is worth perusing through the Eurostat release for some of the nuances in the figures.
For one thing, as Matthew Phillips notes, Spain’s unemployment crisis is now officially more dire than Greece’s – and that’s saying something.
MARIETTA, Georgia (Reuters) – The Federal Reserve can likely begin reducing the pace of its bond-buying stimulus this year, though market turbulence and low inflation bear watching, Atlanta Fed President Dennis Lockhart said on Thursday.
Global financial markets have been turbulent since Fed Chairman Ben Bernanke announced last week the central bank would likely start to dial down the pace of its asset-buying in coming months.
WASHINGTON, June 20 (Reuters) – U.S. Federal Reserve
Chairman Ben Bernanke is playing a potentially dangerous game of
chicken with global financial markets sent reeling by his threat
to scale back the central bank’s huge stimulus program.
The Fed chief stood his ground at a news conference on
Wednesday, laying out in detail a plan to begin winding down the
central bank’s $85 billion a month in bond purchases later this
year. At the same time, he emphasized the Fed does not see such
a move as an outright end to its supportive policy nor would it
mark an imminent start to interest rate increases.
Everybody knows U.S. unemployment, currently at 7.6%, is still too high – especially the millions of Americans struggling to find work. Less widely acknowledged is a recent dip in inflation that puts it well below the Federal Reserve’s 2 percent target. Indeed, at 0.7 percent in April, the Fed’s preferred inflation measure was less than half of the central bank’s explicitly stated goal. So why are Fed officials, gathered in Washington for their latest policy decision today, discussing a pullback in stimulus rather than an increase in it?
According to some economists, it’s because policymakers believe the recent decline in inflation will be transitory and that the rate will gradually move back up toward target as growth picks up during the rest of this year and in 2014. Yesterday’s report on consumer prices corroborated that prospect for some analysts.