Ben Bernanke & US Fed 01 (May 08 - Nov 10 )

[millionairemind]

April 14, 2010, 10.27 am (Singapore time)

Fed official softens on vow to hold rates low

MORGANTOWN - A top US Federal Reserve official said on Tuesday he thinks the time to drop the Fed's promise to hold rates low for a long time might be drawing nearer.

'A couple of months ago, I was saying I was comfortable with the extended period language,' Richmond Federal Reserve Bank president Jeffrey Lacker told reporters after a speech.

'The recent data has made me think that it might be sooner rather than later that we would move that language. It depends on more data coming in,' he said.

Mr Lacker is not a voter on the Fed's interest rate setting panel this year.

The Fed lowered rates to near zero in December 2008 and began promising to keep rates exceptionally low for an extended period soon afterward. With the economy recovering gradually from a deep and damaging recession, the Fed has said it is in no hurry to tighten borrowing conditions, but many in financial markets believe that dropping the extended period pledge will be the Fed's first step in that direction.

Primary dealers polled by Reuters see a 62 per cent probability of a Fed rate hike by the end of the year.

Mr Lacker said he is not ready just yet to drop the extended period pledge, and he and other Fed officials said in speeches on Tuesday the economy is operating well below full capacity and full recovery is a way off.

'The pain is still with many of us to be sure, and we are a long way from a full recovery,' he told a regional Fed forum.

Mr Lacker, known to be one of the more aggressive anti-inflation hawks among policy-makers, said there were signs of stabilisation in housing markets, but overbuilding means that sector won't help lift the recovery.

He said news that employers added 162,000 jobs in March was one of the most encouraging recent signs of economic healing.

However, he added that while the labour market seems to be lifting itself off the floor, rapid growth in employment this year seems unlikely.

Another Fed official said there is little inflationary pressure in the economy that is operating well below its potential.

'There are a lot of people who are unemployed, there are a lot of factories that are not producing at full steam, so we have excess slack,' Dallas Fed Bank president Richard Fisher said in an interview with Fox Business Network.

He is also not a voter this year on the Fed's interest-rate setting Federal Open Market Committee. Fed chairman Ben Bernanke is scheduled to discuss the economic outlook in congressional testimony on Wednesday.

Mr Bernanke did not talk about the economy or monetary policy in a speech on financial education on Tuesday.

He said inflation remains benign, although he stressed that the risks of a sharp decline in inflation had diminished.

Some Fed officials would like to raise the discount rate, the level it charges banks for short-term loans, a Fed report showed on Tuesday. The Fed has taken pains to stress that raising the discount rate nearer to pre-crisis levels signals a normalisation of lending, not a tightening of financial conditions.

Mr Lacker said he has not decided whether the gap between the discount rate and the policy Fed funds rate should revert to a full percentage point.

Another Fed official, Fed governor Daniel Tarullo, focused on financial regulation reform in comments that did not address the economic outlook.

Regulators should consider conducting routine, publicly disclosed 'stress tests' to gauge how well big financial firms could weather a crisis, he said.

Mr Tarullo, the central bank's point person on regulatory reform, said releasing the information would help investors make informed decisions, and encourage public scrutiny of the regulators' methods.

The Fed led stress-testing of the 19 largest US financial firms last year and disclosed the results, a controversial decision even inside the central bank. The concern was that weaker banks might be harmed by the public disclosure. -- REUTERS

[iam802]

I agree with the article.

I just saw on the news quoting Geithner highlighting how 'China move allows them to set interest rates'.

I assume there is only one direction for interest rates to go for US, right?

[kennynah]

US CPI just came in at 0.1% increase at 830pm today. No inflation in sight. Sure they'll eventually hike rates, but when?

[millionairemind]

US CPI just came in at 0.1% increase at 830pm today. No inflation in sight. Sure they'll eventually hike rates, but when?

Even if they hike rates, the first few that takes the rate up (but still below 1%) should not have any negative impact...

[winston]

US CPI just came in at 0.1% increase at 830pm today. No inflation in sight. Sure they'll eventually hike rates, but when?

Rates can be hiked in two ways, voluntarily and involuntarily.

Let's see whether there's enough fools out there, that wants to continuosly lend money to them, at such low rates.

[kennynah]

my only concern is the quick backlash any sudden rate hikes will have on equities and currencies markets...

anyways...bernanke will speak again at 10pm...see he says anything about interest rates...or he may see the same old same old...rates matter is not his responsibility...ask the treasury sec....hahaha..

[millionairemind]

Fed Shouldn’t Reveal Crisis Loans, Banks Vow to Tell High Court
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By Bob Ivry


April 14 (Bloomberg) -- The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.

Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.

The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help.

“Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks,” said Paul Saltzman, the group’s general counsel, in an interview yesterday. “We’re not going to let the Second Circuit opinion stand without seeking a review.”

Regardless of whether the Fed appeals, the Clearing House will take the next legal step by asking for a review by the full appellate court, Saltzman, 49, said at his office in New York. If the ruling is unfavorable, the bank group will petition the Supreme Court, he said.

Joined Lawsuit

The 157-year-old, New York-based Clearing House Payments Co., which processes transactions among banks, is owned by its 20 members. They include Citigroup Inc., Bank of New York Mellon Corp., Deutsche Bank AG, HSBC Holdings Plc, PNC Financial Services Group Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.

The Clearing House Association, a lobbying group with the same members, joined the lawsuit in September 2009, after an initial ruling against the central bank in federal court in Manhattan.

The Fed is “reviewing the decision and considering our options,” said Fed spokesman David Skidmore in Washington. He had no comment on Saltzman’s plans.

Attorneys face a May 3 deadline to file their appeals.

“We’ll wait to see the motion papers,” said Thomas Golden, attorney for Bloomberg who is a partner at New York- based Willkie Farr & Gallagher LLP. “The judges’ decision was well-reasoned, and we doubt further appeals will yield a different result.”

Bloomberg sued in November 2008 under the U.S. Freedom of Information Act, after the Fed denied access to records of four Fed lending programs and a loan the central bank made in connection with New York-based JPMorgan Chase’s acquisition of Bear Stearns Cos. in March 2008.

231 Pages

The central bank contends that 231 pages of daily reports summarizing lending activity, which were prepared by the Federal Reserve Bank of New York for the Fed Board of Governors in Washington, aren’t covered by the FOIA. The statute obliges federal agencies to make government documents available to the press and the public. The suit doesn’t seek money damages.

The Fed released lists on March 31 of assets it acquired in the 2008 bailout of Bear Stearns.

The New York Times Co., the Associated Press and Dow Jones & Co., publisher of the Wall Street Journal, are among media companies that have signed up as friends of the court in support of Bloomberg.

The Fed Board of Governors’ “refusal to disclose the names of borrowers renders public oversight of its actions impossible -- it prevents any assessment of the effectiveness of the Board’s actions and conceals any collusion, corruption, fraud or abuse that might have occurred,” the news organizations said in a letter to the appeals panel.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York)

[kennynah]

this should clearly tell us that the Fed is a private organisation and not a government organ..

[LenaHuat]

Helicopter Ben met PM Lee, Ho Ching and Ambassador Chee on the sidelines of the nuclear summit in Washington. Boy, we are somewhat dead worried abt the Fed's imminent actions

[kennynah]

However, luckily our GDP growth purportedly exploded n that gives our sgd some cushion shd Fed raise rates suddenly