Tag Archives: Federal Reserve

Fed Ready to Boost US Inflation, FOMC Minutes Indicate

Many Federal Reserve policy-makers are apparently ready to ease monetary policy "before long" to stimulate inflation and lift the struggling U.S. economy, according to minutes taken during the Fed’s September 21 session of the Federal Open Market Committee (FOMC).

The FOMC’s official statement last month noted that inflation was "somewhat below" desired levels. The minutes from the meeting elaborate and provide background:

"Several members noted that unless the pace of economic recovery strengthened or underlying inflation moved back toward a level consistent with the Committee’s mandate, they would consider it appropriate to take action soon."

Continue reading Fed Ready to Boost US Inflation, FOMC Minutes Indicate

US Inflation Below Target, Says Fed

The Federal Reserve’s monetary policy committee on Tuesday said U.S. inflation is below target levels, and that it was "prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."

The Labor Department on Friday reported 12-month inflation at 1.1 percent, and that core inflation, which exludes volatile food and energy prices, was 0.9 percent — the smallest increase since January 1966. The level, while the same since April, is below the Feds target range of 1-2 percent.

"Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability," the FOMC statement said.

Continue reading US Inflation Below Target, Says Fed

US Inflation Remains ‘Subdued’, Says Fed

The Federal Reserve ended its two-day meeting Wednesday, and as expected the Federal Open Market Committee (FOMC) did not raise interest rates. Further, in an exact parallel to its last statement, it noted that US inflation remained under control, stating:

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

September inflation data indicated that consumer prices declined 1.3% during the prior 12 months and that core annual inflation, which excludes volatile food and energy prices, rose just 1.5% — well within the Federal Reserve’s comfort range of between 1%-2%.

It appears its benchmark federal funds rate will remain virtually at zero for some time as the "economic activity is likely to remain weak for a time," according to the FOMC.

"The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon," Drew Matus, an economist at Bank of America-Merrill Lynch, was quoted on NYTimes.com. "That is the one consistent theme that gets hammered home time and again."

In a unanimous vote, the FOMC decided to keep its key rate unchanged in a range of zero to 0.25 percent.

The released Fed statement follows in its entirety: Continue reading US Inflation Remains ‘Subdued’, Says Fed

Fed: Economy has ‘Picked Up’, US Inflation ‘Subdued’

The Federal Reserve ended its two-day meeting Wednesday, and the Federal Open Market Committee (FOMC) held interest rates steady near zero, as expected. The FOMC followed the meeting with a statement saying that "economic activity has picked up." It also indicated US inflation was under control, stating:

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

To provide support to mortgage lending and housing markets, the Fed noted that it expects to finish purchases of "$1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt" in a slowing pace until the first quarter of 2010.

August inflation data showed that consumer prices had decreased 1.5% during the prior 12 months and that core annual inflation, which excludes volatile food and energy prices, rose just 1.4%. That was the smallest year-over-year gain since February 2004, and well within the Federal Reserve’s traditional comfort zone of between 1%-2%. Continue reading Fed: Economy has ‘Picked Up’, US Inflation ‘Subdued’

Fed to buy $1 trillion in securities, expects inflation to remain subdued

With expectations for inflation to remain under control and in a move to combat the recession, the Federal Reserve on Wednesday said it would pump more than $1 trillion into the economy.

In a statement following the conclusion of its two-day policy meeting, the Federal Open Market Committee (FOMC) said it would:

  • Increase its purchases of mortgage-backed securities by $750 billion, on top of the already announced $500 billion
  • Buy $300 billion of long-term Treasurys over the next six months

The Fed hopes the first measure will pull down mortgage rates and the second will help ease the credit crunch. Immediately following the news, U.S. stocks rallied, bond prices surged and gold prices reversed direction. Continue reading Fed to buy $1 trillion in securities, expects inflation to remain subdued

Long-term inflation target of 1.7% to 2% set by Fed

The U.S. economy has weakened further and a gradual recovery in economic activity isn’t expected until later this year, Fed policy makers agreed, according to minutes released Wednesday and taken during the closed-door Federal Open Market Committee (FOMC) meeting Jan. 27-28.

The committee also noted their outlook had significant "downside risks," and provided a set of informal long-term economic projections, including that of inflation at 1.7% to 2%. After the meeting, the FOMC held the federal funds rate to a range of between 0 to 0.25%, as it first set in December, and concluded low interest rate levels would need to be kept for some time.

The released minutes make it clearer, however, how some members see the potential for excessive disinflation in 2009, or a deflation risk as St. Louis Fed’s Bullard addressed in a speech Tuesday. Deflation is a persistent decrease in general prices, or the opposite of inflation. Continue reading Long-term inflation target of 1.7% to 2% set by Fed

Fed December minutes paint darker economic picture, lower inflation

Minutes taken during the closed-door Federal Reserve December 15-16 meeting paint a darker than expected picture for the economy, with further contraction and rising unemployment on the horizon.

At the conclusion of its historic meeting, the Federal Open Market Committee (FOMC) slashed rates to a record low of between zero and 0.25%. The minutes, which provide much more detail and are always released several weeks after the official meeting, cite specific expectations reaching into 2009 and 2010. Continue reading Fed December minutes paint darker economic picture, lower inflation

Fed slashes rates to record low, zero to 0.25%

The Federal Reserve aggressively lowered its benchmark federal funds rate to a range of between zero percent and 0.25%, and said it would "employ all available tools to promote the resumption of sustainable economic growth."

Slashing the overnight lending rate by such a degree was an unexpected Fed move. Most everyone had expected a 0.5% cut from its prior 1%. The rate is now at its lowest level since the government started keeping records in 1954.

"It’s a highly unorthodox and creative step," Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon in New York told Reuters. "We think it’s the best possible move for the U.S. consumer and for the financial market."

The announcement was made by the Federal Open Market Committee (FOMC), who released the following statement: Continue reading Fed slashes rates to record low, zero to 0.25%

Fed seen lowering rates toward zero without inflation worries

Greatly reduced inflation pressures and a desire to spark some life into the economy has almost everyone expecting the Federal Reserve to cut its benchmark overnight interest rate from 1% to 0.50%, marking the lowest level on records dating to July 1954.

Plummeting energy prices have taken the sting out of inflation since crude prices tumbled off their record peak near $147 per barrel in July — also when inflation was at its highest for the year. New York crude-oil for January delivery settled to $46.28 a barrel, falling $1.70 on Friday.

Consumer prices dropped a record 1% in October. The Labor Department reports on Tuesday the November CPI, which is the most watched government inflation barometer. Economists expect another record decline to 1.4%. Add in Friday’s report by the government showing producer prices fell to 2.2% and the Fed has an enormous green light to lower rates with little regard for inflation. Continue reading Fed seen lowering rates toward zero without inflation worries

Producer prices drop 2.2% in November

Producer prices fell sharply in November as energy prices plunged for the fourth consecutive month, the Labor Department reported Friday.

The Producer Price Index (PPI), which measures prices at the factory door and inflation pressures before they reach the consumer, fell steeper than expected to 2.2%. Economists had pegged a predictive 2.0% rise. The index registered its biggest monthly decline ever in October, falling a record 2.8%.

Plummeting energy prices again led the way in dragging prices down. The energy index fell 11.2% after a 12.8% drop in the previous month which set a 22-year record. Crude goods declined 12.5% following a 18.6% drop in October.

The consecutive declines further highlights free-falling crude-oil prices, which closed Thursday in New York at $47.98 a barrel — a far distance from its record highs near $147 per barrel in July when inflation peaked.

Continue reading Producer prices drop 2.2% in November