nnuut
Moderator | TSP Legend
Fed Saw Need for `Relatively Low' Interest Rates `For a Time'
By Craig Torres
Feb. 20 (Bloomberg) -- Federal Reserve officials judged that low interest rates ``were appropriate for a time,'' as they enacted the fastest easing of monetary policy in two decades last month.
``Several participants noted that the risks of a downturn in the economy were significant,'' according to minutes of the Fed's Jan. 9 and 21 conference calls and Jan. 29-30 meeting last month. ``Many participants were concerned that the drop in equity prices, coupled with the ongoing decline in house prices, implied reductions in household wealth that would likely damp consumer spending.''
The central bank will lower rates further if financial conditions and the availability of credit deteriorate, Chairman Ben S. Bernanke indicated to lawmakers last week. Since the Fed met, credit-market disruptions have spread to the securities backed by bond insurers, while government figures showed the U.S. lost jobs in January.
Some officials also considered that a reversal of the rate cuts may be needed once the economy stabilizes, the minutes showed.
``Some noted that, when prospects for growth had improved, a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate,'' said the minutes, released in Washington today. Still, policy makers didn't see their rate cut as adding to inflation pressures given the weakness in growth. ``Members agreed that inflation was likely to moderate in coming quarters.''
Rate Cuts
Policy makers cut the benchmark interest rate by a half- point on Jan. 30, to 3 percent, eight days after an emergency reduction of 0.75 percentage point. The Federal Open Market Committee has lowered the rate from 5.25 percent since September.
The worst housing recession in 25 years has damaged bank earnings, resulting in tighter credit and slowing growth. A government report today showed that housing starts remained near their lowest level since 1991 in January.
Officials lowered their projections for economic growth this year, the central bank also said today in releasing the latest quarterly forecasts of district bank presidents and Fed governors.
Central bankers now see the economy expanding 1.3 percent to 2 percent in the fourth quarter from the same period a year before. In October, they predicted growth of 1.8 percent to 2.5 percent. The group sees the Commerce Department's gauge of consumer prices rising 2.1 percent to 2.4 percent, compared with 1.8 percent to 2.1 percent.
Fed Forecasts
The figures represent the median range of projections. Bernanke increased the forecasts from twice-a-year after a review of Fed communications last year.
Traders anticipate the Fed will lower the target rate for overnight loans between banks by another half-point by the end of the next meeting, on March 18.
``The availability of credit to consumers and businesses appeared to be tightening, likely adding to restraint on economic growth,'' the minutes said.
The Fed's Jan. 22 rate cut followed a videoconference at about 6 p.m. the previous evening. Officials gathered after a sell-off in global stock markets from Hong Kong to London threatened to send the Standard & Poor's 500 index of U.S. stocks down as much as 5.3 percent.
Biggest Cut
The three-quarter point cut was the biggest single reduction since the Fed began using the rate as its principal tool of monetary policy about 1990. The cut was conducted to ``begin aligning the real policy rate with a weakening economic situation,'' the minutes said. Some officials were concerned that the cut ``could be misinterpreted as directed at recent declines in stock prices.''
Some credit markets have remained under stress even after the Fed's rate cuts. The cost of protecting corporate bonds from default soared to a record today.
Credit-default swaps on the Markit CDX North America Investment-Grade Index of 125 companies with ratings above junk jumped as much as 13 basis points to 167.25. A basis point is 0.01 percentage point.
Since the beginning of 2007 through the end of January, financial institutions have posted $146 billion in credit losses and asset writedowns.
Inflation Data
The faltering economy has yet to damp inflation, government figures indicated today. The Labor Department's measure of consumer prices rose 4.3 percent in January from a year ago, up from a 4.1 percent rate in December. Stripping out food and energy, the core gauge rose 2.5 percent, the most since March.
Rising energy and commodity costs, along with food prices, are pushing up inflation. Crude oil rose to a record $100.10 a barrel yesterday.
Sales of existing homes fell 13 percent last year, the biggest slump in 25 years, and prices dropped 1.8 percent, the first decrease since records began in 1968.
The U.S. lost jobs for the first time in four years last month, as payrolls fell by 17,000 after an 82,000 gain in December. Confidence among U.S. consumers fell to a 16-year low this month, according to a preliminary index of consumer sentiment by Reuters/University of Michigan released last week.
Economists surveyed by Bloomberg News predict economic growth will slow to a 0.5 percent pace in the first quarter from the annualized rate of 0.6 percent in the previous three months.
Fed staff revised down their growth estimates for the first half of 2008, the minutes show, indicating that they still didn't foresee a recession.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net ,
http://www.bloomberg.com/apps/news?pid=20601087&sid=al0e_Xsy7HW0&refer=home
By Craig Torres
Feb. 20 (Bloomberg) -- Federal Reserve officials judged that low interest rates ``were appropriate for a time,'' as they enacted the fastest easing of monetary policy in two decades last month.
``Several participants noted that the risks of a downturn in the economy were significant,'' according to minutes of the Fed's Jan. 9 and 21 conference calls and Jan. 29-30 meeting last month. ``Many participants were concerned that the drop in equity prices, coupled with the ongoing decline in house prices, implied reductions in household wealth that would likely damp consumer spending.''
The central bank will lower rates further if financial conditions and the availability of credit deteriorate, Chairman Ben S. Bernanke indicated to lawmakers last week. Since the Fed met, credit-market disruptions have spread to the securities backed by bond insurers, while government figures showed the U.S. lost jobs in January.
Some officials also considered that a reversal of the rate cuts may be needed once the economy stabilizes, the minutes showed.
``Some noted that, when prospects for growth had improved, a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate,'' said the minutes, released in Washington today. Still, policy makers didn't see their rate cut as adding to inflation pressures given the weakness in growth. ``Members agreed that inflation was likely to moderate in coming quarters.''
Rate Cuts
Policy makers cut the benchmark interest rate by a half- point on Jan. 30, to 3 percent, eight days after an emergency reduction of 0.75 percentage point. The Federal Open Market Committee has lowered the rate from 5.25 percent since September.
The worst housing recession in 25 years has damaged bank earnings, resulting in tighter credit and slowing growth. A government report today showed that housing starts remained near their lowest level since 1991 in January.
Officials lowered their projections for economic growth this year, the central bank also said today in releasing the latest quarterly forecasts of district bank presidents and Fed governors.
Central bankers now see the economy expanding 1.3 percent to 2 percent in the fourth quarter from the same period a year before. In October, they predicted growth of 1.8 percent to 2.5 percent. The group sees the Commerce Department's gauge of consumer prices rising 2.1 percent to 2.4 percent, compared with 1.8 percent to 2.1 percent.
Fed Forecasts
The figures represent the median range of projections. Bernanke increased the forecasts from twice-a-year after a review of Fed communications last year.
Traders anticipate the Fed will lower the target rate for overnight loans between banks by another half-point by the end of the next meeting, on March 18.
``The availability of credit to consumers and businesses appeared to be tightening, likely adding to restraint on economic growth,'' the minutes said.
The Fed's Jan. 22 rate cut followed a videoconference at about 6 p.m. the previous evening. Officials gathered after a sell-off in global stock markets from Hong Kong to London threatened to send the Standard & Poor's 500 index of U.S. stocks down as much as 5.3 percent.
Biggest Cut
The three-quarter point cut was the biggest single reduction since the Fed began using the rate as its principal tool of monetary policy about 1990. The cut was conducted to ``begin aligning the real policy rate with a weakening economic situation,'' the minutes said. Some officials were concerned that the cut ``could be misinterpreted as directed at recent declines in stock prices.''
Some credit markets have remained under stress even after the Fed's rate cuts. The cost of protecting corporate bonds from default soared to a record today.
Credit-default swaps on the Markit CDX North America Investment-Grade Index of 125 companies with ratings above junk jumped as much as 13 basis points to 167.25. A basis point is 0.01 percentage point.
Since the beginning of 2007 through the end of January, financial institutions have posted $146 billion in credit losses and asset writedowns.
Inflation Data
The faltering economy has yet to damp inflation, government figures indicated today. The Labor Department's measure of consumer prices rose 4.3 percent in January from a year ago, up from a 4.1 percent rate in December. Stripping out food and energy, the core gauge rose 2.5 percent, the most since March.
Rising energy and commodity costs, along with food prices, are pushing up inflation. Crude oil rose to a record $100.10 a barrel yesterday.
Sales of existing homes fell 13 percent last year, the biggest slump in 25 years, and prices dropped 1.8 percent, the first decrease since records began in 1968.
The U.S. lost jobs for the first time in four years last month, as payrolls fell by 17,000 after an 82,000 gain in December. Confidence among U.S. consumers fell to a 16-year low this month, according to a preliminary index of consumer sentiment by Reuters/University of Michigan released last week.
Economists surveyed by Bloomberg News predict economic growth will slow to a 0.5 percent pace in the first quarter from the annualized rate of 0.6 percent in the previous three months.
Fed staff revised down their growth estimates for the first half of 2008, the minutes show, indicating that they still didn't foresee a recession.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net ,
http://www.bloomberg.com/apps/news?pid=20601087&sid=al0e_Xsy7HW0&refer=home
Just doesn't want to jump out of that V wedge I guess?
and hot links try that recipe some time its pretty good even without the rub shouldnt need much bbq to enjoy good ribs
