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: Read more
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%. Read more
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. Read more
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: Read more
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. Read more
Fed cuts interest rates to 1 percent, expects inflation to moderate
The Federal Reserve lowered its federal funds rate, the benchmark overnight lending rate at which banks lend to one another, by 50 basis points to 1 percent at Wednesday’s end of month scheduled meeting.
The latest rate is the lowest since 2004 and joins a new round of global cuts. China and Norway also cut rates on Wednesday, and other countries are expected to follow suite in an attempt to change the economic downturn and fight the ongoing crisis in the credit markets.
The Feds newest reduction follows on the heels of its emergency 1/2 percent interest rate cut on October 8 when world central banks first joined in their coordinated efforts to try to stabilize financial markets and ease out of the global credit crunch.
Today’s move was widely expected, although a minority of analysts suggested the Fed could cut rates by three-quarters of a percentage point to 0.75 percent, marking a never before seen low. Immediately following the announcement, U.S. stocks inched lower.
The announcement was made by the Federal Open Market Committee (FOMC), who released the following statement:
US Federal Reserve and world central banks cut interest rates
Inflation worries were thrown aside as interest rates were cut on Wednesday in a synchronized multi-country response to try to stabilize world financial markets and ease out of the global credit crunch.
Less than a day after Fed chairman Ben Bernanke hinted a rate cut could be in the works, an unscheduled emergency announcement was made by the Federal Open Market Committee (FOMC) to lower its target for the benchmark federal funds rate 50 basis points to 1-1/2 percent. In a coordinated effort, the European Central Bank, China, Britain, Canada, Sweden and Switzerland also cut rates.
The following was released in a joint statement by the central banks:
Fed chief hints at rate cuts, and notes better inflation outlook
Federal Reserve chairman Ben Bernanke signaled Tuesday that a cut in interest rates may turn into a reality as a result of the current economic landscape and a better inflation outlook.
“The combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased,” Bernanke said at the National Association for Business Economics Annual Meeting in Washington.
“At the same time, the outlook for inflation has improved somewhat, though it remains uncertain. In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate."
Inflation eases, but Fed’s Bullard concerned with cutting interest rates
Although the Labor Department’s last report indicated an easing of inflation to 5.4% and a research group said on Thursday that September inflation pressures fell to a more than six-year low, a Fed president thinks lowering interest rates is not the answer right now.
“I think lowering interest rates right now, maybe, is not the right response,” James Bullard, president of the Federal Reserve Bank of St. Louis, told an audience in Bloomington, Indiana after giving a speech on Thursday.
The Federal Reserve is naturally inclined to raise interest rates to combat inflation, and lower them to reduce the pull of downward economic activity or recession.
Fed leaves rates steady at 2% despite financial turmoil and easing inflation
With the latest financial sector turmoil and easing inflation, many economists were at least thinking the Federal Reserve would reduce interest rates on Tuesday. That was not the case. The Fed left the benchmark federal funds rate stead at 2 %, where it’s been since April and for the third straight meeting.
The vote was unanimous, without even a dissent from Dallas Fed President Richard Fisher, who voted to increase rates during two prior Fed meetings.
A MarketWatch article by Greg Robb aptly opened with the the likely intent on the move:
"[The fed is] trying to project an appearance of calm and stability amid the turmoil of financial markets."
The Federal Open Market Committee (FOMC) statement reflects continual concern over economic growth and the direction of inflation despite the latter showing a slight easing according to a report today by the a Labor Department.