Bernanke wants to throw more money at the problem. Says ‘inflation is going to remain below target’. He obviously hasn’t bought bacon in the last year. I like the part about ‘talking’ about inflation keeping it ‘firmly anchored’. That’s a hoot.
That’s like saying talking about sex prohibits …. Well, you know where I am going with that one.
Wire: BLOOMBERG News (BN) Date: Jan 25 2012 13:43:58
Fed Says Key Interest Rate Will Stay Low Until Late 2014 (4)
By Craig Torres and Caroline Salas Gage
Jan. 25 (Bloomberg) -- Federal Reserve officials said their
benchmark interest rate will stay low until at least late 2014
and anticipate that unemployment will remain high and inflation
“The Committee expects to maintain a highly accommodative
stance for monetary policy,” the Federal Open Market Committee
said in a statement released in Washington today. “Economic
conditions -- including low rates of resource utilization and a
subdued outlook for inflation over the medium run -- are likely
to warrant exceptionally low levels for the federal funds rate
at least through late 2014.”
The Fed extended its previous pledge to keep rates low at
least until the middle of 2013 as more than two years of
economic growth have failed to push unemployment below 8.5
percent. Fed officials in a separate statement today lowered
their forecasts for economic growth and inflation this year and
“What they’re doing is setting the table for some sort of
additional monetary easing,” said Scott Minerd, chief
investment officer in Santa Monica, California for Guggenheim
Partners LLC. “The changes in the statement from last month de-
Stocks rose and Treasuries extended gains. The Standard &
Poor’s 500 Index climbed 0.4 percent to 1,320.24 at 2:40 p.m. in
New York. The yield on the current five-year note fell nine
basis points to 0.80 percent after touching the record low of
‘On the Table’
Fed Chairman Ben S. Bernanke, speaking at a news conference
after the statements, said that the option of further large-
scale bond purchases is still “on the table.”
“If inflation is going to remain below target for an
extended period and employment progress’’ is very slow, then
“there is a case’’ for additional monetary stimulus, he said.
The Fed lowered its forecast for growth this year to 2.2
percent to 2.7 percent, down from a projection of 2.5 percent to
2.9 percent in November. It predicted the economy next year will
expand between 2.8 percent to 3.2 percent, down from a previous
forecast of 3.0 percent to 3.5 percent.
In a separate statement of its long-range goals and
strategy, the FOMC specified a 2 percent goal for long-term
inflation, as measured by the annual change in the price index
for personal consumption expenditures.
“Communicating this inflation goal clearly to the public
helps keep longer-term inflation expectations firmly anchored,
thereby fostering price stability,” the panel said in a
statement. It also enhances “the committee’s ability to promote
maximum employment in the face of significant economic
Policy makers declined to specify a goal for employment,
saying that it “is largely determined by non-monetary
factors.” The committee’s longer-run forecast for the jobless
rate is 5.2 percent to 6 percent.
The Fed said it would continue to extend the average
maturity of its $2.6 trillion securities portfolio, a move
dubbed “Operation Twist.” The Fed also maintained its policy
of reinvesting maturing housing debt into agency mortgage-backed
“The Committee expects economic growth over coming
quarters to be modest and consequently anticipates that the
unemployment rate will decline only gradually,” the statement
said. “The Committee also anticipates that over coming
quarters, inflation will run at levels at or below those
consistent with the Committee’s dual mandate.”
Richmond Federal Reserve Bank President Jeffrey Lacker
dissented, and “preferred to omit the description of the time
period over which economic conditions are likely to warrant
exceptionally low levels of the federal funds rate.”
Recent reports on manufacturing, housing and employment
indicated that the economy was picking up speed as the new year
Employers added 200,000 jobs in December, twice the
previous month’s pace, and the unemployment rate dropped to 8.5
percent from 8.7 percent the month before.
Household wealth is getting a boost from rising stock
prices. The Standard and Poor’s 500 Index climbed 4.5 percent in
2012 through yesterday, the best start to the year since 1997,
when it rallied 6.1 percent in the first 14 days.
Harley-Davidson Inc., the biggest U.S. motorcycle maker,
reported $54.6 million income from continuing operations in the
fourth quarter compared with a loss of $42.1 million a year
earlier. Sales at the maker of Fat Boy and V-Rod motorcycles
rose 12 percent in the U.S.
Investors are turning increasingly bullish on U.S. markets
as they declare its economy in better health than major rivals
from Europe to Asia, according to the Bloomberg Global Poll.
Forty-eight percent of respondents predict the U.S. will be
among the world’s best-performing markets this year, according
to the quarterly poll of 1,209 investors, analysts and traders
who are Bloomberg subscribers that was conducted Jan. 23-24.
That’s the highest rating for the U.S. since the poll began in
2009 and it’s more than twice that of Brazil and China, the
Private forecasters predict the U.S. economy will grow 2.3
percent this year, up from 1.8 percent in 2011, according to a
median estimate in a Bloomberg survey from Jan. 6 to Jan. 11.
Fed officials are still concerned about the sustainability
of consumer spending as savings rates fall and as disposable
income adjusted for inflation shrinks, said Roberto Perli,
managing director of policy research at International Strategy
and Investment Group Inc. in Washington.
A deeper crisis in Europe is another cause for concern. The
International Monetary Fund yesterday cut its forecast for
global growth this year and said the euro crisis threatens to
derail the world economy.
For the U.S., “the top risks are unemployment and
Europe,” said Drew Matus, senior U.S. economist at UBS
Securities LLC and a former New York Fed staff member.
UBS estimates that every 0.7 percentage point decline in
euro-area growth cuts U.S. output by 0.3 point. The IMF
yesterday forecast the 17-nation euro area would shrink 0.5
percent this year.
Google Inc., owner of the world’s most popular Internet
search engine, last week reported fourth-quarter revenue and
profit that missed analysts’ estimates as a slowdown in Europe
Some Fed officials have indicated that they remain open to
more bond purchases to keep interest rates low and support
Atlanta Fed President Dennis Lockhart told reporters Jan. 9
that he hadn’t closed out “the option” for more stimulus,
while New York Fed President William C. Dudley said in a Jan. 6
speech that it’s “appropriate” to evaluate whether the Fed
could do more to boost growth.
“Europe is the reason” Fed officials are considering
buying more bonds to boost the economy, said Lou Crandall, chief
economist at Wrightson ICAP LLC in Jersey City, New Jersey.
“You want to gain as much momentum as you can in case
another storm hits,” Crandall said. “They are worried about
the lack of a catalyst in the U.S. to get us to escape
velocity” of self-sustaining growth.
The Fed’s $2.3 trillion of bond purchases in two rounds of
so-called quantitative easing haven’t stoked inflation. A gauge
of consumer prices tied to personal expenditures, excluding food
and energy, rose 1.7 percent for the 12 months ending November.
For Related News and Information:
Credit crunch page: WWCC <GO>
Fed balance-sheet figures: ALLX FARW <GO>
Government relief programs: GGRP <GO>
Fed monetary policy: FOMC <GO>
Fed Web links: FRBM <GO>
Central bank rates worldwide: CBRT <GO>
--With assistance from Vivien Lou Chen and Steve Matthews.
Editors: Christopher Wellisz, James Tyson
To contact the reporters on this story:
Craig Torres at +1-202-654-1220
Caroline Salas Gage at +212-617-2314 or
To contact the editor responsible for this story:
Christopher Wellisz at +1-202-624-1862 or
-0- Jan/25/2012 19:43 GMT
Copyright (c) 2012, Bloomberg, L. P.
################################ END OF STORY 1 ##############################
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