The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.
Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
Inflations down,but its nothing we can't handel
Canada’s inflation rate slowed in February but stayed within the central bank’s comfort zone, news that may reassure policymakers somewhat but is unlikely to trigger a change in their neutral stance on interest rates.
Consumer prices rose 1.1 per cent in the year to February, down from a 1-1/2-year high of 1.5 per cent in January but above the market forecast of a 0.9 per cent increase, Statistics Canada data showed on Friday. Lower gasoline prices partially offset higher shelter and food costs in February, it said.
We've Changed the Guideposts but not our methods
The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.
Unsure it's a good Idea
In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.
It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.
But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.
U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.
The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.
Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.
We agreed to raise rates when it went under 6.5%
Another shift in that communications strategy is set to occur when the central bank’s interest-rate-setting committee gathers for two days of talks on Tuesday and Wednesday, as it’s the first meeting to be led by Janet Yellen, the new chairwoman. The Fed will release a policy statement and updated economic forecasts at 2 p.m. Eastern on Wednesday, and Yellen will hold a press conference at the end of the deliberations at 2:30 p.m.
Janet Yellen
With the Fed and the markets basically on the same page on the economy, the current near-zero interest-rate policy, and the rate of reduction in bond purchases, the central bank has an opportunity to revamp its forward guidance tool, now the chief policy instrument.
“They've got a little room to unanchor these things,” said Lewis Alexander, chief economist at Nomura Holdings Inc. in New York.
So-called forward guidance attempts to drive down long-term rates by promising to keep short-term rates low for a long time.
The Fed has reworded its pledge throughout the financial crisis. Alexander said the early forms of forward guidance were simpler as the Fed was simply saying that it was a long way from raising rates.
The Fed’s current pledge is to hold rates steady until “well past” the point when the unemployment rate falls below 6.5%.
But the unemployment rate has steadily dropped over the past year, before ticking up slightly to 6.7% in February.
4 things to know about Janet's Fed
Get ready for Janet Yellen's first policymaking meeting as head of the Federal Reserve.
The Fed is set to meet this Tuesday and Wednesday to mull over the latest economic data, issue new forecasts and re-evaluate its plan for winding down its stimulus program. Here are the top things to look for:
1) Tapering will continue: The central bank has been buying trillions in bonds since late 2008 in an effort to lower long-term interest rates. The goal: Stimulate the economy by making it cheaper to take out loans.
But the Fed has determined it's time to start winding down that stimulus program. Since December, the central bank has been slowly reducing its bond purchases at each meeting, in a process Wall Street has dubbed "tapering." The Fed was previously buying $85 billion in bonds each month, then reduced the amount to $75 billion in January, and then $65 billion in February.
Economists expect a similar reduction in bond purchases will be announced at the upcoming meeting, especially given Yellen's comments before a Congressional committee last month. "We expect to continue reducing the pace of purchases in measured steps," she said.
2) The goalposts will change: The Fed has kept its key short-term interest rate near zero since 2008, also as a way to stimulate more spending.
Investors have become accustomed to low interest rates but are looking for signals about when the Fed might eventually raise rates as the economy strengthens.
So far, the Fed has said it wants to see the unemployment rate fall to around 6.5%, or inflation rise as high as 2.5%, before it will be ready to raise rates. But here's the problem: The unemployment rate, at 6.7% in February, is already nearing that point, and Yellen still thinks the economy is too weak.
She may want to abandon the numerical targets altogether and focus on qualitative information instead.
The unemployment rate alone is "not a sufficient statistic to measure the health of the labor market," she told Senators last month.
Meanwhile, New York Fed President Bill Dudley has said the 6.5% unemployment rate "is already obsolete." It's a "reasonable time to revamp" the Fed statement to take out that threshold, he said at a Wall Street Journal event last week.
3) Weather puts the Fed in wait-and-see mode: Severe winter storms throughout much of the country weighed on economic data over the last few months, making it hard to get a clean reading on the recovery. Retail sales, job growth, housing and manufacturing all seem to have been impacted, but it's unclear whether the slowdown was temporary.
"The question is how much of this activity comes back in the spring, how much is simply lost, and how much the slowdown reflects other factors..." Julia Coronado, chief North American economist for BNP Paribas, wrote in a research note.
Coronado expects the Fed will acknowledge the harsh winter in its policy statement and may even nudge some of its economic forecasts lower for the year.
That said, Yellen is still expected to express some optimism about the economy picking up in the spring.
4) Yellen is still focused on jobs, jobs, jobs: Following the Fed's meeting, Yellen will take questions from reporters in a press conference Wednesday afternoon. She's likely to emphasize that she remains deeply concerned about ongoing weakness in the labor market.
As of February, 3.8 million Americans were unemployed for at least six months, and 7.2 million workers were stuck in part-time jobs, even though they would prefer full-time hours. Yellen looks closely at both measures, and neither has improved much lately.
Meanwhile, inflation remains well under the Fed's goal for 2% over the long-run, so Yellen is unlikely to view rising prices as a major concern.
(CNNMoney)
The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.
Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
Inflations down,but its nothing we can't handel
Canada’s inflation rate slowed in February but stayed within the central bank’s comfort zone, news that may reassure policymakers somewhat but is unlikely to trigger a change in their neutral stance on interest rates.
Consumer prices rose 1.1 per cent in the year to February, down from a 1-1/2-year high of 1.5 per cent in January but above the market forecast of a 0.9 per cent increase, Statistics Canada data showed on Friday. Lower gasoline prices partially offset higher shelter and food costs in February, it said.
We've Changed the Guideposts but not our methods
The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.
Unsure it's a good Idea
In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.
It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.
But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.
U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.
The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.
Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.
We agreed to raise rates when it went under 6.5%
Another shift in that communications strategy is set to occur when the central bank’s interest-rate-setting committee gathers for two days of talks on Tuesday and Wednesday, as it’s the first meeting to be led by Janet Yellen, the new chairwoman. The Fed will release a policy statement and updated economic forecasts at 2 p.m. Eastern on Wednesday, and Yellen will hold a press conference at the end of the deliberations at 2:30 p.m.
Janet Yellen
With the Fed and the markets basically on the same page on the economy, the current near-zero interest-rate policy, and the rate of reduction in bond purchases, the central bank has an opportunity to revamp its forward guidance tool, now the chief policy instrument.
“They've got a little room to unanchor these things,” said Lewis Alexander, chief economist at Nomura Holdings Inc. in New York.
So-called forward guidance attempts to drive down long-term rates by promising to keep short-term rates low for a long time.
The Fed has reworded its pledge throughout the financial crisis. Alexander said the early forms of forward guidance were simpler as the Fed was simply saying that it was a long way from raising rates.
The Fed’s current pledge is to hold rates steady until “well past” the point when the unemployment rate falls below 6.5%.
But the unemployment rate has steadily dropped over the past year, before ticking up slightly to 6.7% in February.
4 things to know about Janet's Fed
Get ready for Janet Yellen's first policymaking meeting as head of the Federal Reserve.
The Fed is set to meet this Tuesday and Wednesday to mull over the latest economic data, issue new forecasts and re-evaluate its plan for winding down its stimulus program. Here are the top things to look for:
1) Tapering will continue: The central bank has been buying trillions in bonds since late 2008 in an effort to lower long-term interest rates. The goal: Stimulate the economy by making it cheaper to take out loans.
But the Fed has determined it's time to start winding down that stimulus program. Since December, the central bank has been slowly reducing its bond purchases at each meeting, in a process Wall Street has dubbed "tapering." The Fed was previously buying $85 billion in bonds each month, then reduced the amount to $75 billion in January, and then $65 billion in February.
Economists expect a similar reduction in bond purchases will be announced at the upcoming meeting, especially given Yellen's comments before a Congressional committee last month. "We expect to continue reducing the pace of purchases in measured steps," she said.
2) The goalposts will change: The Fed has kept its key short-term interest rate near zero since 2008, also as a way to stimulate more spending.
Investors have become accustomed to low interest rates but are looking for signals about when the Fed might eventually raise rates as the economy strengthens.
So far, the Fed has said it wants to see the unemployment rate fall to around 6.5%, or inflation rise as high as 2.5%, before it will be ready to raise rates. But here's the problem: The unemployment rate, at 6.7% in February, is already nearing that point, and Yellen still thinks the economy is too weak.
She may want to abandon the numerical targets altogether and focus on qualitative information instead.
The unemployment rate alone is "not a sufficient statistic to measure the health of the labor market," she told Senators last month.
Meanwhile, New York Fed President Bill Dudley has said the 6.5% unemployment rate "is already obsolete." It's a "reasonable time to revamp" the Fed statement to take out that threshold, he said at a Wall Street Journal event last week.
3) Weather puts the Fed in wait-and-see mode: Severe winter storms throughout much of the country weighed on economic data over the last few months, making it hard to get a clean reading on the recovery. Retail sales, job growth, housing and manufacturing all seem to have been impacted, but it's unclear whether the slowdown was temporary.
"The question is how much of this activity comes back in the spring, how much is simply lost, and how much the slowdown reflects other factors..." Julia Coronado, chief North American economist for BNP Paribas, wrote in a research note.
Coronado expects the Fed will acknowledge the harsh winter in its policy statement and may even nudge some of its economic forecasts lower for the year.
That said, Yellen is still expected to express some optimism about the economy picking up in the spring.
4) Yellen is still focused on jobs, jobs, jobs: Following the Fed's meeting, Yellen will take questions from reporters in a press conference Wednesday afternoon. She's likely to emphasize that she remains deeply concerned about ongoing weakness in the labor market.
As of February, 3.8 million Americans were unemployed for at least six months, and 7.2 million workers were stuck in part-time jobs, even though they would prefer full-time hours. Yellen looks closely at both measures, and neither has improved much lately.
Meanwhile, inflation remains well under the Fed's goal for 2% over the long-run, so Yellen is unlikely to view rising prices as a major concern.
(CNNMoney)
The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.
Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
Inflations down,but its nothing we can't handel
Canada’s inflation rate slowed in February but stayed within the central bank’s comfort zone, news that may reassure policymakers somewhat but is unlikely to trigger a change in their neutral stance on interest rates.
Consumer prices rose 1.1 per cent in the year to February, down from a 1-1/2-year high of 1.5 per cent in January but above the market forecast of a 0.9 per cent increase, Statistics Canada data showed on Friday. Lower gasoline prices partially offset higher shelter and food costs in February, it said.
We've Changed the Guideposts but not our methods
The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.
Unsure it's a good Idea
In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.
It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.
But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.
U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.
The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.
Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.
We agreed to raise rates when it went under 6.5%
Another shift in that communications strategy is set to occur when the central bank’s interest-rate-setting committee gathers for two days of talks on Tuesday and Wednesday, as it’s the first meeting to be led by Janet Yellen, the new chairwoman. The Fed will release a policy statement and updated economic forecasts at 2 p.m. Eastern on Wednesday, and Yellen will hold a press conference at the end of the deliberations at 2:30 p.m.
Janet Yellen
With the Fed and the markets basically on the same page on the economy, the current near-zero interest-rate policy, and the rate of reduction in bond purchases, the central bank has an opportunity to revamp its forward guidance tool, now the chief policy instrument.
“They've got a little room to unanchor these things,” said Lewis Alexander, chief economist at Nomura Holdings Inc. in New York.
So-called forward guidance attempts to drive down long-term rates by promising to keep short-term rates low for a long time.
The Fed has reworded its pledge throughout the financial crisis. Alexander said the early forms of forward guidance were simpler as the Fed was simply saying that it was a long way from raising rates.
The Fed’s current pledge is to hold rates steady until “well past” the point when the unemployment rate falls below 6.5%.
But the unemployment rate has steadily dropped over the past year, before ticking up slightly to 6.7% in February.
4 things to know about Janet's Fed
Get ready for Janet Yellen's first policymaking meeting as head of the Federal Reserve.
The Fed is set to meet this Tuesday and Wednesday to mull over the latest economic data, issue new forecasts and re-evaluate its plan for winding down its stimulus program. Here are the top things to look for:
1) Tapering will continue: The central bank has been buying trillions in bonds since late 2008 in an effort to lower long-term interest rates. The goal: Stimulate the economy by making it cheaper to take out loans.
But the Fed has determined it's time to start winding down that stimulus program. Since December, the central bank has been slowly reducing its bond purchases at each meeting, in a process Wall Street has dubbed "tapering." The Fed was previously buying $85 billion in bonds each month, then reduced the amount to $75 billion in January, and then $65 billion in February.
Economists expect a similar reduction in bond purchases will be announced at the upcoming meeting, especially given Yellen's comments before a Congressional committee last month. "We expect to continue reducing the pace of purchases in measured steps," she said.
2) The goalposts will change: The Fed has kept its key short-term interest rate near zero since 2008, also as a way to stimulate more spending.
Investors have become accustomed to low interest rates but are looking for signals about when the Fed might eventually raise rates as the economy strengthens.
So far, the Fed has said it wants to see the unemployment rate fall to around 6.5%, or inflation rise as high as 2.5%, before it will be ready to raise rates. But here's the problem: The unemployment rate, at 6.7% in February, is already nearing that point, and Yellen still thinks the economy is too weak.
She may want to abandon the numerical targets altogether and focus on qualitative information instead.
The unemployment rate alone is "not a sufficient statistic to measure the health of the labor market," she told Senators last month.
Meanwhile, New York Fed President Bill Dudley has said the 6.5% unemployment rate "is already obsolete." It's a "reasonable time to revamp" the Fed statement to take out that threshold, he said at a Wall Street Journal event last week.
3) Weather puts the Fed in wait-and-see mode: Severe winter storms throughout much of the country weighed on economic data over the last few months, making it hard to get a clean reading on the recovery. Retail sales, job growth, housing and manufacturing all seem to have been impacted, but it's unclear whether the slowdown was temporary.
"The question is how much of this activity comes back in the spring, how much is simply lost, and how much the slowdown reflects other factors..." Julia Coronado, chief North American economist for BNP Paribas, wrote in a research note.
Coronado expects the Fed will acknowledge the harsh winter in its policy statement and may even nudge some of its economic forecasts lower for the year.
That said, Yellen is still expected to express some optimism about the economy picking up in the spring.
4) Yellen is still focused on jobs, jobs, jobs: Following the Fed's meeting, Yellen will take questions from reporters in a press conference Wednesday afternoon. She's likely to emphasize that she remains deeply concerned about ongoing weakness in the labor market.
As of February, 3.8 million Americans were unemployed for at least six months, and 7.2 million workers were stuck in part-time jobs, even though they would prefer full-time hours. Yellen looks closely at both measures, and neither has improved much lately.
Meanwhile, inflation remains well under the Fed's goal for 2% over the long-run, so Yellen is unlikely to view rising prices as a major concern.
(CNNMoney)
The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.
Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
Inflations down,but its nothing we can't handel
Canada’s inflation rate slowed in February but stayed within the central bank’s comfort zone, news that may reassure policymakers somewhat but is unlikely to trigger a change in their neutral stance on interest rates.
Consumer prices rose 1.1 per cent in the year to February, down from a 1-1/2-year high of 1.5 per cent in January but above the market forecast of a 0.9 per cent increase, Statistics Canada data showed on Friday. Lower gasoline prices partially offset higher shelter and food costs in February, it said.
The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.
Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
The Banks are actually sound-Who knew?
The Fed has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.
29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.
The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.
Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.
Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.
The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."
The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.
Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."
Fitch said the country's capital markets are "the deepest and most liquid in the world."
Some information for this report was provided by Reuters.
Inflations down,but its nothing we can't handel
Canada’s inflation rate slowed in February but stayed within the central bank’s comfort zone, news that may reassure policymakers somewhat but is unlikely to trigger a change in their neutral stance on interest rates.
Consumer prices rose 1.1 per cent in the year to February, down from a 1-1/2-year high of 1.5 per cent in January but above the market forecast of a 0.9 per cent increase, Statistics Canada data showed on Friday. Lower gasoline prices partially offset higher shelter and food costs in February, it said.We've Changed the Guideposts but not our methods
The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.
|
| Unsure it's a good Idea |
In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.
It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.
But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.
U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.
The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.
Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.
We agreed to raise rates when it went under 6.5%
Another shift in that communications strategy is set to occur when the central bank’s interest-rate-setting committee gathers for two days of talks on Tuesday and Wednesday, as it’s the first meeting to be led by Janet Yellen, the new chairwoman. The Fed will release a policy statement and updated economic forecasts at 2 p.m. Eastern on Wednesday, and Yellen will hold a press conference at the end of the deliberations at 2:30 p.m.
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| Janet Yellen |
“They've got a little room to unanchor these things,” said Lewis Alexander, chief economist at Nomura Holdings Inc. in New York.
So-called forward guidance attempts to drive down long-term rates by promising to keep short-term rates low for a long time.
The Fed has reworded its pledge throughout the financial crisis. Alexander said the early forms of forward guidance were simpler as the Fed was simply saying that it was a long way from raising rates.
The Fed’s current pledge is to hold rates steady until “well past” the point when the unemployment rate falls below 6.5%.
But the unemployment rate has steadily dropped over the past year, before ticking up slightly to 6.7% in February.
4 things to know about Janet's Fed
Get ready for Janet Yellen's first policymaking meeting as head of the Federal Reserve.
The Fed is set to meet this Tuesday and Wednesday to mull over the latest economic data, issue new forecasts and re-evaluate its plan for winding down its stimulus program. Here are the top things to look for:
The Fed is set to meet this Tuesday and Wednesday to mull over the latest economic data, issue new forecasts and re-evaluate its plan for winding down its stimulus program. Here are the top things to look for:
1) Tapering will continue: The central bank has been buying trillions in bonds since late 2008 in an effort to lower long-term interest rates. The goal: Stimulate the economy by making it cheaper to take out loans.
But the Fed has determined it's time to start winding down that stimulus program. Since December, the central bank has been slowly reducing its bond purchases at each meeting, in a process Wall Street has dubbed "tapering." The Fed was previously buying $85 billion in bonds each month, then reduced the amount to $75 billion in January, and then $65 billion in February.
Economists expect a similar reduction in bond purchases will be announced at the upcoming meeting, especially given Yellen's comments before a Congressional committee last month. "We expect to continue reducing the pace of purchases in measured steps," she said.
2) The goalposts will change: The Fed has kept its key short-term interest rate near zero since 2008, also as a way to stimulate more spending.
Investors have become accustomed to low interest rates but are looking for signals about when the Fed might eventually raise rates as the economy strengthens.
So far, the Fed has said it wants to see the unemployment rate fall to around 6.5%, or inflation rise as high as 2.5%, before it will be ready to raise rates. But here's the problem: The unemployment rate, at 6.7% in February, is already nearing that point, and Yellen still thinks the economy is too weak.
She may want to abandon the numerical targets altogether and focus on qualitative information instead.
The unemployment rate alone is "not a sufficient statistic to measure the health of the labor market," she told Senators last month.
Meanwhile, New York Fed President Bill Dudley has said the 6.5% unemployment rate "is already obsolete." It's a "reasonable time to revamp" the Fed statement to take out that threshold, he said at a Wall Street Journal event last week.
3) Weather puts the Fed in wait-and-see mode: Severe winter storms throughout much of the country weighed on economic data over the last few months, making it hard to get a clean reading on the recovery. Retail sales, job growth, housing and manufacturing all seem to have been impacted, but it's unclear whether the slowdown was temporary.
"The question is how much of this activity comes back in the spring, how much is simply lost, and how much the slowdown reflects other factors..." Julia Coronado, chief North American economist for BNP Paribas, wrote in a research note.
Coronado expects the Fed will acknowledge the harsh winter in its policy statement and may even nudge some of its economic forecasts lower for the year.
That said, Yellen is still expected to express some optimism about the economy picking up in the spring.
4) Yellen is still focused on jobs, jobs, jobs: Following the Fed's meeting, Yellen will take questions from reporters in a press conference Wednesday afternoon. She's likely to emphasize that she remains deeply concerned about ongoing weakness in the labor market.
As of February, 3.8 million Americans were unemployed for at least six months, and 7.2 million workers were stuck in part-time jobs, even though they would prefer full-time hours. Yellen looks closely at both measures, and neither has improved much lately.
Meanwhile, inflation remains well under the Fed's goal for 2% over the long-run, so Yellen is unlikely to view rising prices as a major concern.
25 Fast Facts About The Federal Reserve
#1 The greatest period of economic growth in U.S. history was when there was no central bank.
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help “administer” those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.
#18 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to “regulate” the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So exactly why is the Federal Reserve doing it?
#25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
$105 billion worth of US government bonds taken out of the Fed
$105 billion dollars worth of US government bonds out of the Federal Reserve, according to the latest data from the US central bank.
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A withdrawal of this scale is unprecedented. It’s important to note that just because these assets were pulled from the Fed doesn't mean that they were actually sold.. Liquid though the US bond market is, if someone dumped more than $100 billion of bonds on it, it would cause a pretty good ripple, which likely would have pushed up government bond yields sharply. Nothing like that has happened over the last week.
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So it’s more likely that these Treasurys were just transferred to another, perhaps more neutral, bank. Maybe just for safe-keeping, until all this unpleasantness blows over. Anyway, there’s plenty of speculation along those lines at the moment.
#1 The greatest period of economic growth in U.S. history was when there was no central bank.
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help “administer” those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.
#18 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to “regulate” the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So exactly why is the Federal Reserve doing it?
#25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
$105 billion worth of US government bonds taken out of the Fed
$105 billion dollars worth of US government bonds out of the Federal Reserve, according to the latest data from the US central bank.
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Marketwatch interview of Randall Kroszner-Tapering,housing,inflation and the Chicago Cubs.
WASHINGTON (MarketWatch) — Ahead of next week’s Federal Reserve meeting, one former official agrees with many of the committee that it’s time to change the central bank’s guidance on how long it will keep short-term interest rates near zero.
But to what is the question.
Randall Kroszner, a former governor of the Federal Reserve between 2006 and 2009 and now a professor at the University of Chicago Booth School of Business, talked to MarketWatch about how the central bank can thread the needle between both a qualitative and a quantitative approach to setting guidance, as well as his outlook on the economy — and the Chicago Cubs.
MarketWatch : The Federal Reserve policy committee is meeting next week. Will they continue to taper?
Kroszner : I don’t think there has been any new evidence that has come to the Fed to change the decision to continue the reduction of asset purchases.
MarketWatch : What would it take for them to change?
Kroszner : It would take quite a bit for them to change the so-called taper. They’d have to have a significant change in their perception of the risks in both the U.S. and global economy, a significant change in labor market performance, or a significant change in inflation.
MarketWatch : Why does the Fed insist that taper is not on a “pre-set course?”
Kroszner : They have started to think that some of the costs may potentially be outweighing the benefits or asset purchases. And since at least the [economic] data so far are coming in broadly within their forecasted range, there is really not much of a reason to change the policy that they have set on which is to have this gradual step-down.
MarketWatch : How to you see the economy. You’re optimistic that we could see growth in 2014 around 3%?
Kroszner : There is a reasonable chance of achieving higher growth than we’ve seen over the last few years. But we still have a lot of headwinds. We seem to have put some of the fiscal uncertainty behind us, which I think has been a very important drag. We still have a lot of uncertainty on the regulatory front, particularly health care affecting the willingness of firms to hire, and then, of course, there are global uncertainties. The U.S. fundamentals would likely get us to 3% growth for this year, but there are still a lot of things that could go wrong to challenge that.
MarketWatch : What is your outlook for housing?
Kroszner : The Fed has been able to thread the needle and pursue the policy that it wishes to, which is to reduce the pace of asset purchases, without it having significant negative repercussions on the housing recovery.
MarketWatch : What is your outlook for inflation?
Kroszner : In the short and intermediate run, it is very hard to see where the inflation pressures would come from. It is possible that with a more robust labor market recovery we will start to see some growth in wages, and, actually, that would broadly be welcome. But given the slow pace of the recovery and given that it looks like much of the rest of the world is not recovering very rapidly, you are not going to be getting a lot of external pressures on inflation. And so, it is likely that inflation will continue to stay low for the intermediate term.
MarketWatch : Given this outlook, what will the Fed do at the meeting? Do you see a change in the forward guidance?
Kroszner : I think the substance of the policy is unlikely to change because the data have really has been consistent with their forecasts and where they were a few months ago. However, it is time to seriously re-think that 6.5% unemployment target because we are so close to it.
MarketWatch : How will they change it?
Kroszner : A move from 6.5% to something that might be more qualitative would be perceived by the market as not a substantive change in policy even though it is a substantive change in the words.
One way to think about it is to look at the evolution of the forward guidance over the last five years. So five years ago, when I was there, we introduced the idea of keeping extraordinary accommodation for an extended period. Then there was a move to an explicit date and then a move to 6.5% as a guideline.
Those other transitions were smooth because the Fed had gotten market expectations to be roughly where they wanted them to be, and then they could move on to a different way of expressing it, and that is likely to be what will happen now.
MarketWatch : So what will it look like, something like the Bank of England’s 18 different measures of labor market health?
Randall Kroszner, ex-governor of the U.S. Federal Reserve, in 2012.
Kroszner : What came through loud and clear in the market’s response to the Bank of England’s approach is that was not helpful. There is an optimal amount of transparency. When you start going with too much detail then that transparency becomes opacity. It is more likely the Fed will be more qualitative about the state of the labor market, with some particular indicators mentioned but perhaps not as much focus on the unemployment rate in and of itself. Given market expectations being so well grounded from the forward guidance from before, they can make that transition reasonably smoothly.
MarketWatch : So the Fed can move because they’ve earned the market’s trust?
Kroszner : Moving away from 6.5% unemployment is not going to change the way the market thinks. They are going to realize that this is not an attempt by the Fed to change market expectations or a fundamental change in the way they are looking at things. It is just given that the unemployment rate has fallen by so much, and mostly for not the best reasons, that they will use different words but really convey the same substance about how they are thinking about the economy and what they are likely to do.
MarketWatch : When do you think the first rate hike will come?
Kroszner : I do think it will come sometime in my lifetime.
It really is based on the economics, the data, and the forecast. If the economy grows roughly in line with their forecast, then you could start to see a move towards to some interest rate increases in late 2015, but obviously things could change. There could be other shocks. It is possible if the economy takes off more rapidly, and the labor market starts to recover more rapidly, we could start to see a move up in inflation and then I think the Fed would be forced to act a bit earlier. Models always have smooth transitions. In the real world we never get that smoothness. So I am sure that something will happen that will be inconsistent with the forecast to either make the Fed move a little bit faster or a little bit slower.
MarketWatch : So which will happen first? The Cubs win the World Series or short-term interest rates get to 4%?
Kroszner : I think that’s a close call.
We don't need inflation targets,we adapt as we go in Canada
The Bank of Canada’s flexible inflation target has served Canada well in both tranquil and turbulent times and remains the right policy framework to address the current economic environment of persistently weak inflation,
Senior Deputy Governor Tiff Macklem
Senior Deputy Governor Tiff Macklem said on Saturday in a lecture at Concordia University’s John Molson School of Business in Montréal.
“Inflation targeting was designed against a backdrop of high inflation, but its key features of symmetry and flexibility also give us room to manoeuvre in an environment of disinflation.”
Mr. Macklem discussed the various causes of the decline in inflation since 2012. He said that this disinflation appears to reflect a combination of “bad” disinflation stemming from a significant and persistent excess supply in the economy, and “good” disinflation resulting from heightened competition in the retail sector. In theory, monetary policy should look through good disinflation as long as inflation expectations remain anchored, and work to offset bad disinflation. In practice, there is considerable uncertainty surrounding our measurement and projections, making monetary policy more of an exercise in risk management.
“We need to do our best to determine why inflation is below target, but no matter how hard we try, there will be uncertainty about our diagnosis,” Mr. Macklem said. “Our work at the Bank of Canada is both to sharpen the analysis as much as we can and, at the same time, to take account of the risks and uncertainties as we determine the appropriate course for monetary policy to achieve our inflation target.”
The Senior Deputy Governor highlighted that the floating exchange rate is a key element of the inflation-targeting framework, allowing for a made-in-Canada monetary policy and serving as a buffer against shocks to the economy.
“In light of the recent depreciation of the Canadian dollar, it bears stressing that the Bank does not have a target for the exchange rate - it has an inflation target. The exchange rate is determined in markets, and we neither promote any specific value for the Canadian dollar, nor thwart its movements.”
Rates will have to rise- FED
Janet Yellen has a message to markets: the Federal Reserve will keep interest rates low for a while yet and, when it does begin to tighten monetary policy, it will do so only slowly.
Janet Yellen
For now, the public has zeroed in on when the U.S. central bank might finally raise rates after more than five years near zero. But that tells only half the story: just as important for American families and businesses is how quickly the Fed will hike borrowing costs, and how high.
The Fed has telegraphed that the first rate rise is likely to come around the middle of next year, as long as the U.S. economy keeps healing, and policymakers are increasingly describing how the first tightening cycle in more than a decade will play out. It is an issue that Yellen, who took over as chair of the central bank last month, will almost certainly have to address after a policy meeting next week.
The plan for now is for a series of modest rate increases that do not risk sending the economy into relapse, according to Fed policymakers who have discussed it in recent weeks.
Marketwatch interview of Randall Kroszner-Tapering,housing,inflation and the Chicago Cubs.
WASHINGTON (MarketWatch) — Ahead of next week’s Federal Reserve meeting, one former official agrees with many of the committee that it’s time to change the central bank’s guidance on how long it will keep short-term interest rates near zero.
But to what is the question.
Randall Kroszner, a former governor of the Federal Reserve between 2006 and 2009 and now a professor at the University of Chicago Booth School of Business, talked to MarketWatch about how the central bank can thread the needle between both a qualitative and a quantitative approach to setting guidance, as well as his outlook on the economy — and the Chicago Cubs.
MarketWatch : The Federal Reserve policy committee is meeting next week. Will they continue to taper?
Kroszner : I don’t think there has been any new evidence that has come to the Fed to change the decision to continue the reduction of asset purchases.
MarketWatch : What would it take for them to change?
Kroszner : It would take quite a bit for them to change the so-called taper. They’d have to have a significant change in their perception of the risks in both the U.S. and global economy, a significant change in labor market performance, or a significant change in inflation.
MarketWatch : Why does the Fed insist that taper is not on a “pre-set course?”
Kroszner : They have started to think that some of the costs may potentially be outweighing the benefits or asset purchases. And since at least the [economic] data so far are coming in broadly within their forecasted range, there is really not much of a reason to change the policy that they have set on which is to have this gradual step-down.
MarketWatch : How to you see the economy. You’re optimistic that we could see growth in 2014 around 3%?
Kroszner : There is a reasonable chance of achieving higher growth than we’ve seen over the last few years. But we still have a lot of headwinds. We seem to have put some of the fiscal uncertainty behind us, which I think has been a very important drag. We still have a lot of uncertainty on the regulatory front, particularly health care affecting the willingness of firms to hire, and then, of course, there are global uncertainties. The U.S. fundamentals would likely get us to 3% growth for this year, but there are still a lot of things that could go wrong to challenge that.
MarketWatch : What is your outlook for housing?
Kroszner : The Fed has been able to thread the needle and pursue the policy that it wishes to, which is to reduce the pace of asset purchases, without it having significant negative repercussions on the housing recovery.
MarketWatch : What is your outlook for inflation?
Kroszner : In the short and intermediate run, it is very hard to see where the inflation pressures would come from. It is possible that with a more robust labor market recovery we will start to see some growth in wages, and, actually, that would broadly be welcome. But given the slow pace of the recovery and given that it looks like much of the rest of the world is not recovering very rapidly, you are not going to be getting a lot of external pressures on inflation. And so, it is likely that inflation will continue to stay low for the intermediate term.
MarketWatch : Given this outlook, what will the Fed do at the meeting? Do you see a change in the forward guidance?
Kroszner : I think the substance of the policy is unlikely to change because the data have really has been consistent with their forecasts and where they were a few months ago. However, it is time to seriously re-think that 6.5% unemployment target because we are so close to it.
MarketWatch : How will they change it?
Kroszner : A move from 6.5% to something that might be more qualitative would be perceived by the market as not a substantive change in policy even though it is a substantive change in the words.
One way to think about it is to look at the evolution of the forward guidance over the last five years. So five years ago, when I was there, we introduced the idea of keeping extraordinary accommodation for an extended period. Then there was a move to an explicit date and then a move to 6.5% as a guideline.
Those other transitions were smooth because the Fed had gotten market expectations to be roughly where they wanted them to be, and then they could move on to a different way of expressing it, and that is likely to be what will happen now.
MarketWatch : So what will it look like, something like the Bank of England’s 18 different measures of labor market health?
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| Randall Kroszner, ex-governor of the U.S. Federal Reserve, in 2012. |
Kroszner : What came through loud and clear in the market’s response to the Bank of England’s approach is that was not helpful. There is an optimal amount of transparency. When you start going with too much detail then that transparency becomes opacity. It is more likely the Fed will be more qualitative about the state of the labor market, with some particular indicators mentioned but perhaps not as much focus on the unemployment rate in and of itself. Given market expectations being so well grounded from the forward guidance from before, they can make that transition reasonably smoothly.
MarketWatch : So the Fed can move because they’ve earned the market’s trust?
Kroszner : Moving away from 6.5% unemployment is not going to change the way the market thinks. They are going to realize that this is not an attempt by the Fed to change market expectations or a fundamental change in the way they are looking at things. It is just given that the unemployment rate has fallen by so much, and mostly for not the best reasons, that they will use different words but really convey the same substance about how they are thinking about the economy and what they are likely to do.
MarketWatch : When do you think the first rate hike will come?
Kroszner : I do think it will come sometime in my lifetime.
It really is based on the economics, the data, and the forecast. If the economy grows roughly in line with their forecast, then you could start to see a move towards to some interest rate increases in late 2015, but obviously things could change. There could be other shocks. It is possible if the economy takes off more rapidly, and the labor market starts to recover more rapidly, we could start to see a move up in inflation and then I think the Fed would be forced to act a bit earlier. Models always have smooth transitions. In the real world we never get that smoothness. So I am sure that something will happen that will be inconsistent with the forecast to either make the Fed move a little bit faster or a little bit slower.
MarketWatch : So which will happen first? The Cubs win the World Series or short-term interest rates get to 4%?
Kroszner : I think that’s a close call.
We don't need inflation targets,we adapt as we go in Canada
The Bank of Canada’s flexible inflation target has served Canada well in both tranquil and turbulent times and remains the right policy framework to address the current economic environment of persistently weak inflation,
Senior Deputy Governor Tiff Macklem said on Saturday in a lecture at Concordia University’s John Molson School of Business in Montréal.
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| Senior Deputy Governor Tiff Macklem |
“Inflation targeting was designed against a backdrop of high inflation, but its key features of symmetry and flexibility also give us room to manoeuvre in an environment of disinflation.”
Mr. Macklem discussed the various causes of the decline in inflation since 2012. He said that this disinflation appears to reflect a combination of “bad” disinflation stemming from a significant and persistent excess supply in the economy, and “good” disinflation resulting from heightened competition in the retail sector. In theory, monetary policy should look through good disinflation as long as inflation expectations remain anchored, and work to offset bad disinflation. In practice, there is considerable uncertainty surrounding our measurement and projections, making monetary policy more of an exercise in risk management.
“We need to do our best to determine why inflation is below target, but no matter how hard we try, there will be uncertainty about our diagnosis,” Mr. Macklem said. “Our work at the Bank of Canada is both to sharpen the analysis as much as we can and, at the same time, to take account of the risks and uncertainties as we determine the appropriate course for monetary policy to achieve our inflation target.”
The Senior Deputy Governor highlighted that the floating exchange rate is a key element of the inflation-targeting framework, allowing for a made-in-Canada monetary policy and serving as a buffer against shocks to the economy.
“In light of the recent depreciation of the Canadian dollar, it bears stressing that the Bank does not have a target for the exchange rate - it has an inflation target. The exchange rate is determined in markets, and we neither promote any specific value for the Canadian dollar, nor thwart its movements.”
Rates will have to rise- FED
Janet Yellen has a message to markets: the Federal Reserve will keep interest rates low for a while yet and, when it does begin to tighten monetary policy, it will do so only slowly.
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| Janet Yellen |
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| Dennis Lockhart, president of the Atlanta Fed |
While an unexpected jump in inflation or a dangerous asset bubble could force its hand, the central bank is likely to deliver a dovish message of patience when it comes to removing its extraordinary monetary stimulus.
"What I'm anticipating is that the gradual rise in rates would acknowledge that there are still conditions out there that are sub-optimal," Dennis Lockhart, president of the Atlanta Fed, said in an interview last week.
"I can in no way predict exactly the conditions at that time," he added. But "I don't expect when we get to that point that we're likely to have to move the policy rate up in large chunks to get it high fast."
As with its easing cycle, the Fed will be in uncharted territory when the time comes to tighten. No major central bank has had to raise rates after keeping them at effectively zero for as long as the Fed has in the wake of the 2007-2009 financial crisis and recession.
We shouldn't turn off the Fed's taps for another 2 to 3 years
Turbulence on Wall Street will likely return when the Federal Reserve decides to hike interest rates, top U.S. economists said in a paper that warned the Fed's huge stimulus program could have harmful consequences.
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 found mutual fund investors participated heavily in the selloff even though their market bets weren't made with a lot of borrowed money.
This is important because policymakers sometimes weigh the chances of a financial crash by looking at the size of leveraged bets, which can be prone to swift reversals. The research highlights a perhaps under-appreciated risk for the Fed's plans to wind down its easy-money stimulus.
We shouldn't turn off the Fed's taps for another 2 to 3 years
Turbulence on Wall Street will likely return when the Federal Reserve decides to hike interest rates, top U.S. economists said in a paper that warned the Fed's huge stimulus program could have harmful consequences.
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| Minneapolis Fed President Narayana Kocherlakota. |
"Whenever the decision to tighten policy is made, then the instability seen in summer of 2013 is likely to reappear," wrote JPMorgan chief U.S. economist Michael Feroli, University of Chicago professor Anil Kashyap and two other well-respected economists.
Several Fed officials were present at the high-profile economics conference where the paper was presented, and two said the paper raised real concerns.
That said, the ideas highlighted by the paper already play into the Fed's current monitoring of financial risks, said Minneapolis Fed President Narayana Kocherlakota.
Kocherlakota, who is a voting member on the Fed's rate-setting policy committee this year, has argued forcefully for monetary stimulus and said the U.S. economy remains so weak that the Fed still has another "two to three years" to mull financial stability risks.
Big wigs in the Fed want to dust off Monterey Policy
The Federal Reserve's top regulator said on Tuesday that the U.S. central bank should not rule out using monetary policy to combat asset price bubbles that potentially threaten financial stability.
Weighing into a long-standing debate, Fed Governor Daniel Tarullo, the central bank's point person on financial supervision, said regulatory tools might not be enough on their own to prevent the formation of economically damaging bubbles.
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Daniel Tarullo
"In reviewing the relationship between financial stability considerations and monetary policy ... monetary policy action cannot be taken off the table as a response to the build-up of broad and sustained systemic risk," Tarullo, who has a permanent vote on monetary policy but rarely talks publicly about it, told the National Association for Business Economics.
More than five years of near-zero Fed interest rates and trillions of dollars in asset purchases have raised concerns that the central bank may need to tighten policy before achieving its economic goal of preventing asset bubbles.
Tarullo said that while investors are taking on more risks in high-yield corporate bonds and leveraged loans, for example, there was no need to change monetary policy at the moment.
But he urged the Fed to establish a better framework to judge trade-offs between enhancing financial stability and reducing economic activity, before risks grew more urgent.
Incorporating such considerations into policy decisions does not require a new, formal mandate in addition to the Fed's congressionally-set goals of price stability and sustainable low unemployment, Tarullo added.
At a policy-setting meeting last month, "several" Fed officials suggested that financial-market risks, such as asset-price bubbles, should be an explicit consideration as they consider when to finally raise rates.
MORE WORK ON REGULATION
Five years after the collapse of Lehman Brothers, regulators need to do more to ensure the biggest U.S.-based banks are safe and taxpayers are protected from costly bailouts, Tarullo said.
"I don't think that we're at, or even really close to, the point at which we can say, 'Okay, now we can be pretty comfortable that along the spectrum of concerns we've come far enough that we're hitting about the right trade-off.'"
An unsustainable build-up of leverage in mortgage assets on Wall Street sparked the 2007-2009 financial crisis. A flurry of subsequent rule-making is meant to reinforce the financial system, but some worry that the Fed's unprecedented easy-money policies could fuel another damaging bubble.
"While ad hoc supervisory action aimed at specific lending or risks is surely a useful tool, it has its limitations," Tarullo said, citing the "strong inflows" in the corporate bonds and leveraged loans that raise "the possibility of large losses going forward."
He said the Fed is closely watching the risks posed by its easy monetary policies "particularly given the possibility that interest rates may remain historically low for some time even after" policymakers begin to raise them.
"Our monitoring does find some evidence of increased duration and credit risk, but the increases appear relatively moderate to date - particularly at the largest banks and life insurers," he said.
Based on published forecasts, the central bank plans to halt its bond-buying later this year and start to raise rates some time in 2015, as long as the economy continues to expand and unemployment continues to drift lower.
Reuters
Reuters
Big wigs in the Fed want to dust off Monterey Policy
The Federal Reserve's top regulator said on Tuesday that the U.S. central bank should not rule out using monetary policy to combat asset price bubbles that potentially threaten financial stability.
Weighing into a long-standing debate, Fed Governor Daniel Tarullo, the central bank's point person on financial supervision, said regulatory tools might not be enough on their own to prevent the formation of economically damaging bubbles.
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| Daniel Tarullo |
More than five years of near-zero Fed interest rates and trillions of dollars in asset purchases have raised concerns that the central bank may need to tighten policy before achieving its economic goal of preventing asset bubbles.
Tarullo said that while investors are taking on more risks in high-yield corporate bonds and leveraged loans, for example, there was no need to change monetary policy at the moment.
But he urged the Fed to establish a better framework to judge trade-offs between enhancing financial stability and reducing economic activity, before risks grew more urgent.
Incorporating such considerations into policy decisions does not require a new, formal mandate in addition to the Fed's congressionally-set goals of price stability and sustainable low unemployment, Tarullo added.
At a policy-setting meeting last month, "several" Fed officials suggested that financial-market risks, such as asset-price bubbles, should be an explicit consideration as they consider when to finally raise rates.
MORE WORK ON REGULATION
Five years after the collapse of Lehman Brothers, regulators need to do more to ensure the biggest U.S.-based banks are safe and taxpayers are protected from costly bailouts, Tarullo said.
"I don't think that we're at, or even really close to, the point at which we can say, 'Okay, now we can be pretty comfortable that along the spectrum of concerns we've come far enough that we're hitting about the right trade-off.'"
An unsustainable build-up of leverage in mortgage assets on Wall Street sparked the 2007-2009 financial crisis. A flurry of subsequent rule-making is meant to reinforce the financial system, but some worry that the Fed's unprecedented easy-money policies could fuel another damaging bubble.
"While ad hoc supervisory action aimed at specific lending or risks is surely a useful tool, it has its limitations," Tarullo said, citing the "strong inflows" in the corporate bonds and leveraged loans that raise "the possibility of large losses going forward."
He said the Fed is closely watching the risks posed by its easy monetary policies "particularly given the possibility that interest rates may remain historically low for some time even after" policymakers begin to raise them.
"Our monitoring does find some evidence of increased duration and credit risk, but the increases appear relatively moderate to date - particularly at the largest banks and life insurers," he said.
Based on published forecasts, the central bank plans to halt its bond-buying later this year and start to raise rates some time in 2015, as long as the economy continues to expand and unemployment continues to drift lower.
Reuters
It doesn't matter if you don't win.You still get $80,000
Oscar nominees left disappointed at next weekend's star-studded ceremony will be comforted by a lavish goodie bag, valued at close to $80,000 (€58,000).
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Distinctive Assets, a Los Angeles-based marketing firm, has been offering "celebrity swag" for 15 years now to non-winners in the Best Actor, Best Actress, Supporting Actor, Supporting Actress and Best Director categories, according to a press release.
The contents of said bag of treats, revealed by US magazines, include such delights as luxury vodka, fine art, aerial circus lessons and…pepper spray guns (scroll down to see list).
Plenty of pet care products are also thrown in to the mix, along with holiday packages to Hawaii, Las Vegas, Japan and the Canadian Rockies.
The LA-designed hampers also offer weight loss shakes, personal training sessions, hair restoration surgery and even a bizarre procedure that "rejuvenates and enhances the genital tissue of a woman".
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| Leonardo Dicaprio |
The list in full
ARTAS Robotic Hair Transplant surgery
Walk Japan tour
Best of Vegas holiday package
Halo natural pet food (host Ellen DeGeneres is an ambassador and actors can donate the food to an animal charity of their choice)
Rocky Mountaineer train trip
Imanta Mexico holiday package
Dr Charles Runels' O-Shot procedure to enhance sexual response
Steamist home spa system
Koala Landing resort stay in Kauai
Epic pet health therapy
Gizara arts print
Huntley Drive fitness training sessions
Krystal Klear filtered water system
Max Martin shoes
Le Petit Cirque lessons
A house call from respected acupuncturist Heather Lounsbury
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| Amy Adams |
Jan Lewis bracelet
Slow watch made in Switzerland
Acure skincare
Jitseu handbags
Narrative clip camera
Rouge organic maple syrup
Coolway Go Pro hairdryer
Mace pepper spray guns
Polar Loop activity tracker
M3K beauty products
Horse shampoo for humans
Chocolatines of flavours including 'chocolate-dipped bacon', 'chianti wine with olive' and 'champagne brut with bleu cheese bark'
Knit & Co cable knit mittens
Slimware portion control dinnerware
Betty Jane candies
Blossoms Blends tea
Hydroxycut weight loss products
Dosha herbal tea lollipops
Aviv 613 vodka
Cannonball wine
Bee Free Honee organic apple honey
Wrag Wrap sustainable gift wrap
Simon's Happy Pet shampoo
What the Facebook!-Facebook to buy WhatsApp for $19 Billion
Facebook Inc. agreed to buy messaging company WhatsApp for $19 billion in cash and stock, a blockbuster transaction that dwarfs the already sky-high prices that other startups have been able to recently command.
The 55-employee company, which acts as a kind of replacement for text messaging, has seen its use more than double in the past nine months to 450 million monthly users. That makes its service more popular than Twitter Inc., the widely used microblogging service which has about 240 million users and is currently valued at about $30 billion.
But who is the face behind the WhatsApp phenomena
The 55-employee company, which acts as a kind of replacement for text messaging, has seen its use more than double in the past nine months to 450 million monthly users. That makes its service more popular than Twitter Inc., the widely used microblogging service which has about 240 million users and is currently valued at about $30 billion.
But who is the face behind the WhatsApp phenomena
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| Jan Koum |
According to a profile by Forbes, Jan Koum, 38, was born and raised near Kiev, Ukraine during the Soviet era. He lived as an only child in a house that didn't have hot water. He moved to Mountain View, California as a teenager with his mother, and lived off food stamps for a time. He taught himself computer programming and earned a job as an infrastructure engineer at Yahoo in the late 1990s. After working at Yahoo for several years he decided to launch a messaging app through which people could send text messages via the Internet instead of through cellular SMS texting. Brian Acton, a friend of Koum’s at Yahoo, rallied the first seed funding for the new company was named a co-founder.
Facebook’s CEO Mark Zuckerberg has been eyeing WhatsApp for a long time and first began courting Koum early in 2012. The two had a series of discussions in the ensuing years, over dinners and walks and hikes. Zuckerberg officially popped the question on Feb. 9, telling Koum,
“If we joined together, that would help us really connect the rest of the world.”
Koum considered for a few days, then visited Zuckerberg’s home on Valentine’s Day to accept the deal. The two reportedly hashed out the terms of the buyout over chocolate-covered strawberries.
:In a conference call with analysts, Koum would not disclose any planned features for WhatsApp. He only offered that the company hopes to make messaging faster and more stable this year. But he did emphasize that, for now, the company is focusing on growth instead of monetization. With Zuckerberg himself saying that advertising isn't appropriate for messaging services, WhatsApp will likely continue is $0.99-per-year subscription fee as its main revenue source. But given massive amount of money Facebook just doled out, the app’s new parent company no doubt has greater long-term aspirations for it as a revenue generator.
Forbes estimates that Koum owns about 45 percent of WhatsApp, which would net him $6.8 billion in the deal. That figure dwarfs the amount the founders of Twitter received during the company’s IPO in November.
Besides making its founders billionaires, the deal marks an enormous windfall for Sequoia Capital, the only venture firm that backed WhatsApp. Sequoia invested about $60 million for a stake valued at up to $3 billion in the deal, according to a person familiar with the matter.
The deal price also easily outranks any acquisition of startups in recent years, including Facebook's purchase of photo-sharing app Instagram for more than $1 billion in 2012, and, a year earlier, Microsoft Corp.'s $8.5 billion buy of video-calling company Skype.
Columbia Business School professor Moshe Cohen joins the News Hub and explains how Facebook's plan to purchase WhatsApp will help the social-media giant where Twitter has tripped up: ramping up its user growth.
Beyond revenue, the deal could help shelter the social network against the shifting tastes of teen users, some of whom have grown cool to it, and bolster its position internationally. WhatsApp is particularly popular outside of the U.S.
The transaction comes in the wake of Facebook's failed attempt to purchase another messaging service popular with younger users, Snapchat, for roughly $3 billion last year.
WhatsApp has long been seen as a takeover target for Internet giants. Google Inc. had reached out to buy the company several years ago, two people familiar with the situation said, while two other people said deal talks between the two companies also took place recently. A Google spokesman declined to comment.
The growth of WhatsApp
Facebook had fewer than 150 million users after its fourth year, one third that of WhatsApp in the same time period.
Equally enticing is the percentage of WhatsApp users who log onto the service at least once a day. That figure sits at 70%, even higher than Facebook's 61%.
WhatsApp processes 50 billion messages a day, Mr. Goetz wrote, yet has only 32 engineers and doesn't employ any marketing or public-relations people.
WhatsApp built its business on the idea of offering instant messaging without the fees that carriers often charge. The app lets uses send text, pictures and video to anyone with the software, free. Unlike Apple Inc.'s iMessage, it works on all the major mobile operating systems.
The company goes out of its way to remain private, offering little in the way of information to government agencies trying to track people. Once delivered, messages are deleted from the company's servers. Privacy was particularly important to Mr. Koum, who grew up in a communist country with a secret police.
"Jan's childhood made him appreciate communication that was not bugged or taped," Mr. Goetz wrote. "When he arrived in the U.S. as a 16-year-old immigrant living on food stamps, he had the extra incentive of wanting to stay in touch with his family in Russia and the Ukraine."
Interest rates,Gold and Cuts-It's all happening at the Fed
Federal Reserve officials started to debate raising interest rates in January, with some arguing they might need to move sooner than expected, minutes of the meeting revealed on Wednesday.
The Fed has kept interest rates at close to zero since the end of the financial crisis in 2008
. According to minutes of the 28-29 January meeting, released after the customary three-week lag: “A few participants raised the possibility that it might be appropriate to increase the federal funds rate relatively soon.”
The officials were concerned about inflation but others argued inflation was too low.
Any rise is unlikely in the short term. Most Fed officials continued to believe it would not be appropriate to raise short-term rates until 2015 or later, according to economic projections officials submitted at their December meeting. They also argued that standard policy tools did not apply, as the US economy continues to feel the impact of the recession.
The Fed had previously suggested any rise in interest rates would be linked to the unemployment rate falling below 6.5%.
Last month unemployment dipped to 6.6%, but problems remain in the jobs market. The percentage of people no longer seeking work is at 30-year highs.
Long-term and youth unemployment are also high, as are the jobless rates for African Americans and hispanics.
The news came as the Fed appeared to largely shrug off disappointing monthly jobs reports from the Labor Department; A report published after the Fed meeting showed continued weakness in January, with the US adding just 113,000 jobs for the month, well below recent monthly gains.
Still turning off the taps
December’s disappointing jobs figures did not deter the Fed’s decision to cut back on its quantitative easing (QE) economic stimulus programme. QE is currently pumping $65bn a month into the bond markets, in an attempt to keep down interest rates and encourage investment. The rate was cut by $10bn after January’s meeting.This has caused gold to drop by 1% this Wednesday.
"What the Fed is saying is the economy is strong enough for it to continue pulling back its bond purchases, and the equities may continue to rally, so there is not as much a need forprecious metals as a safe haven," said Tom Power a senior commodity broker RJO Futures.
American Property buying slows as Fed turn off the taps
Pending home sales fell to the lowest point since October 2011.
The NAR's seasonally adjusted pending home sales index dropped 8.7 percent last month to 92.4.
That's the seventh straight monthly decline for the index, which previews upcoming sales.
Rising mortgage rates and price increases crimped sales in recent months.
Cold weather in December also stalled home purchases.
Sales of previously occupied homes totaled 5.1 million in 2013
That's the highest in 7 years, but it's still below the 5.5 million that is consistent with a healthy housing market.
The average interest rate on a 30-year mortgage dropped to 4.32 percent this week from 4.39 percent the previous week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 percent.
That increase occurred after Federal Reserve Chairman Ben Bernanke indicated that the Fed would start to slow its bond-buying program before the end of the year. The Fed has reduced its monthly bond purchases from $85 billion to $65 billion in its last two policy meetings. The program is intended to push down longer-term interest rates and encourage more borrowing, spending and hiring.
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| Cold weather in December also stalled home purchases. |
Fed's taps are still going off but interest rates remain near zero
Top Fed officials believe their decision last month to reduce the pace of the U.S. central bank’s bond-buying stimulus was well received by financial markets. That, in turn, allows them to make another $10 billion cut to the bank’s monthly bond purchases at the January 28-29 meeting without needing to adjust their promise to keep interest rates low in the future.
Janet Yellen incoming Chairperson of the Federal Reserve
Top Fed officials believe their decision last month to reduce the pace of the U.S. central bank’s bond-buying stimulus was well received by financial markets. That, in turn, allows them to make another $10 billion cut to the bank’s monthly bond purchases at the January 28-29 meeting without needing to adjust their promise to keep interest rates low in the future.
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| Janet Yellen incoming Chairperson of the Federal Reserve |
As the promise stands, the Fed has said it expects to keep rates near zero until well past the time unemployment falls below 6.5 percent, especially if inflation remains low. Joblessness dropped faster than expected last year and hit 6.7 percent in December, down from 7.0 percent the previous month.
Had the drop in unemployment sparked a sell off in bonds, the Fed might have reinforced its commitment to stimulus by tampering with its low-rates promise. But investors appear to have interpreted the data as a one-off event that would not prompt a quicker-than-expected policy tightening.
Dollar rises as Fed turns off the taps,but lukewarm reaction from Wall Street
The dollar rose after economic data kept alive expectations that the Federal Reserve will continue to cut back its stimulus.
The dollar rose after economic data kept alive expectations that the Federal Reserve will continue to cut back its stimulus.
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| The Federal Reserve |
However on Wall Street, Intel and General Electric were among the biggest decliners. Shares of Intel Corp lost 4.7 percent to $25.29, weighing on all three major U.S. indexes after its fourth-quarter earnings missed expectations by a penny and the company gave a lukewarm forecast for revenue for the current quarter.
General Electric Co lost 2.8 percent to $26.44. The conglomerate posted a slightly better-than-expected rise in quarterly revenue, propelled by its oil pumps and jet engines businesses, but its full-year profit margins were disappointing.
The Feds beige book is out
The survey, covering the end of November and December, showed hiring in most areas was "muted", backing Labour Department data that showed a slowdown in job creation last month
Nine Districts indicated the local economy was expanding at a moderate pace; among these, the Atlanta and Chicago
Real estate markets generally continued to improve, according to District reports. Although a few Districts indicated home sales or residential construction in some areas had slowed or declined in recent months, most cited increased residential sales activity and construction as well as rising home prices.
Read the full report at http://www.federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20140115.pdf
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