David Kirkpatrick

January 14, 2010

The latest Fed Beige Book sees …

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:58 pm

… well, beige. Things aren’t getting worse, but they aren’t really getting all that much better either.

From the link:

“While economic activity remains at a low level, [economic] conditions have improved modestly” according to the Federal Reserve’s Beige Book released in advance of the Federal Open Market Committee’s January 26-27 monetary policy meeting. The Beige Book said the “improvements are broader geographically” than they were at the beginning of December. The Beige Book reiterated concerns about the labor market.

The Beige Book was compiled on the basis of reports at the 12 Federal Reserve districts as of January 4. While the Beige Book provides an anecdotal snapshot of the economy, it is rarely cited in the minutes of the FOMC meetings, though the minutes note participants also refer to anecdotal reports.

The details of the report were less optimistic than the opening paragraph.

May 1, 2009

Text of Fed’s interest rate statement

Filed under: Business, Politics — Tags: , , — David Kirkpatrick @ 1:08 pm

The statement:

Text of the Federal Reserve’s Statement on Interest Rates
Following is the text of the statement by the Federal Reserve on Wednesday announcing it was holding its base federal funds target rate at a record low between zero and 0.25 percent:Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

 

In light of increasing economic slack here and abroad, the committee expects that inflation will remain subdued. Moreover, the committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The committee will maintain the target range for the federal funds rate at 0 to one-quarter percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

The committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of financial and economic developments.

Voting for the F.O.M.C. monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

March 23, 2009

Fed buying up additional $1T-plus in securities

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:05 pm

The sheer hugeness of all the dollar figures being thrown around by the Fed, Treasury and Congress is staggering. Hopefully this will work. If nothing else, it is truly unprecedented.

From the link:

The Federal Reserve’s surprise announcement Wednesday that it would purchase more than $1 trillion in Treasury securities and mortgage bonds in hopes of sparking greater economic activity shows that Chairman Ben Bernanke is working hard to keep his pledge to do whatever it takes to reverse the nation’s deep recession.

The Fed’s rate-setting Federal Open Market Committee ended a two-day meeting with the announcement that it would leave its benchmark federal funds rate near zero. That was expected. Unexpected was word that the Fed would now aggressively purchase assets to get money flowing across the broader economy.

“It’s a decision by the committee to go all out,” said Laurence Meyer, a former Fed governor from 1996 to 2002, joking that “every move these days is historic and unprecedented.”

March 19, 2009

The Fed’s printing money

This move could really hurt the dollar, and is seen by many (most?) economists as a true “nuclear option.” Make sure you’re belted in — this ride ain’t over yet.

From the link:

Expectations of Fed buying raised the prices, and consequently pushed down the interest rate yields, on mortgage-backed securities as well as Treasury bonds, which were included in the deal. Stocks rose slightly as well, while the dollar fell on inflation worries. The yield on the benchmark 10-year Treasury note plummeted one-half percentage point, to around 2.5%.

“The good news is that the Fed is clearly being a lot more aggressive,” said Desmond Lachman, a resident fellow at the American Enterprise Institute. “The bad news is that I think it reflects their assessment that the economy is a whole lot weaker than they thought it would be.”

The Fed did not cut short-term interest rates because it can’t—they’re already at virtually zero. The post-meeting statement said the rate-setting Federal Open Market Committee “anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The FOMC statement was full of surprises, albeit in the Fed’s typical bland language. The Fed committed itself to buying another $750 billion this year in mortgage-backed securities issued by “agencies” like Fannie Mae and Freddie Mac, on top of the $500 billion it had already committed to buying. It doubled to $200 billion the amount of agency debt it will buy this year.

And in a surprising change of direction, the Fed said it will buy $300 billion of longer-term Treasury securities. Up until now, Federal Reserve Chairman Ben Bernanke had said there was no need for the Fed to buy Treasuries since there was a strong market for them already. The Fed’s new thinking seems to be that it can’t hurt to try a little Treasury buying in hopes that the money will trickle down to non-Treasury securities. It said the goal of the Treasury purchases is “to help improve conditions in private credit markets.”

February 19, 2009

FOMC outlook bleak

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:06 pm

It’s been bleak and now it’s worsening.

From the link:

The U.S. economy was weakening further in January and a gradual recovery wasn’t likely until the second half of the year, members of the Federal Open Market Committee agreed, according to minutes of the Jan. 27 and 28 meeting released on Wednesday.

At the meeting, the committee held its interest-rate target near zero, and promised that it would “employ all available tools” to restore the economy to growth.

Many policymakers saw some risk of excessively low inflation for a protracted period, the minutes said, and a few even warned of deflation – a general decline of prices and wages.

According to the minutes, the FOMC’s updated forecasts predict that the economy would likely shrink between 1.3% and 0.5% this year, and grow about 2.5% to 3.3% in 2010. The unemployment rate would likely rise to 8.5% to 8.8% this year before gradually declining over the next two years. The group said consumer prices would likely rise 0.3% to 1% this year.

The outlook is considerably worse than in October, when they thought the economy might grow as much as 1.1%.

The minutes also contain the FOMC’s first public long-term economic projections, a step closer to adopting a formal inflation target. Among the 16 governors and bank presidents, the central tendency for long-term inflation was 1.7% to 2%, with a majority clustering at 1.9% or 2%.

January 29, 2009

Interest rate remains a floating point below 0.25%

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 5:44 pm

I still think this “floating point” business is one of the crazier things to come out of the ongoing financial crisis and the Fed’s shatter-shot approach to fixing things.

From the link:

Despite all of the new programs the Federal Reserve has created in the past 18 months to deal with the financial crisis, there is one thing even Chairman Ben Bernanke was unable to overcome: the number zero.

The Federal Open Market Committee ended its two-day meeting Wednesday deciding to leave the nation’s interest rate unchanged at the range of 0% to 0.25%, saying the economy remains “weakened” and did not expect any economic recovery to occur until later this year.

However, the bank announced in its statement that it would consider purchase more assets or buying longer-dated securities – possibly the 10-year bond – outright if circumstances warranted. 

“Information received since the Committee met in December suggests that the economy has weakened further,” the Federal Reserve said in its statement. “Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly.”