Fed policymakers expected to keep benchmark rate near zero
Fed policymakers expected to keep benchmark rate near zero
09:09, November 03, 2009 
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The US economy may have turned a corner after the deepest recession in some 70 years, but Federal Reserve policymakers appear to be in no rush to raise interest rates.
The Fed is widely expected to keep its benchmark interest rate where it has been since December - near zero - when it meets this week.
With underlying inflation pressures actually decreasing and most Fed officials expecting the recovery to be slow, there is little incentive for the Fed to change its easy money policy.
"Anybody who expects major changes to the Fed's statement is likely to be disappointed," said Stephen Stanley, US economist at RBS.
Fed officials, who meet today and tomorrow, could discuss how they will prepare markets for an eventual policy shift, but analysts say it is too soon for the Fed to even hint toward an exit by tweaking its pledge to keep rates extraordinarily low for an "extended period".
Even as the US economy appears to be still in need of Fed support, the repercussions of emergency monetary policies are being felt around the world.
Brazil has acted to stem the flood of speculative capital to its economy by adopting a 2 percent tax on foreign investment. Other nations have begun to intervene to keep their currencies from rising too sharply against the falling dollar.
Among top Fed officials a debate has broken out about how soon the central bank will need to act to nip inflation in the bud, although none are advocating a move now.
Financial markets will comb through the central bank's policy statement, which will be released at around 2:15 pm EST (1915 GMT) tomorrow, for any clues on when the easy money period will start drawing to a close.
Most analysts at top US banks expect the Fed's policy-setting Federal Open Market Committee to keep interest rates on hold until mid-2010 or later, though interest-rate futures markets are pricing in an increase earlier in 2010.
The most significant outcomes of the Fed's last two policy meetings concerned the central bank's purchases of US government and mortgage-related debt.
The Fed stopped buying longer-term Treasury debt last week, while the mortgage-related asset purchase program has been extended into early 2010 to provide for an orderly wind down.
"Things are going to start to get interesting in 2010, but for the moment they've got all their ducks in a row," Stanley said.
The Fed will note that the economy grew in the third quarter, snapping a deep four-quarter plunge and likely ending the US recession.
The officials are also likely to repeat there is still enough slack in the economy for inflation not to be an immediate worry.
Source:China Daily
The Fed is widely expected to keep its benchmark interest rate where it has been since December - near zero - when it meets this week.
With underlying inflation pressures actually decreasing and most Fed officials expecting the recovery to be slow, there is little incentive for the Fed to change its easy money policy.
"Anybody who expects major changes to the Fed's statement is likely to be disappointed," said Stephen Stanley, US economist at RBS.
Fed officials, who meet today and tomorrow, could discuss how they will prepare markets for an eventual policy shift, but analysts say it is too soon for the Fed to even hint toward an exit by tweaking its pledge to keep rates extraordinarily low for an "extended period".
Even as the US economy appears to be still in need of Fed support, the repercussions of emergency monetary policies are being felt around the world.
Brazil has acted to stem the flood of speculative capital to its economy by adopting a 2 percent tax on foreign investment. Other nations have begun to intervene to keep their currencies from rising too sharply against the falling dollar.
Among top Fed officials a debate has broken out about how soon the central bank will need to act to nip inflation in the bud, although none are advocating a move now.
Financial markets will comb through the central bank's policy statement, which will be released at around 2:15 pm EST (1915 GMT) tomorrow, for any clues on when the easy money period will start drawing to a close.
Most analysts at top US banks expect the Fed's policy-setting Federal Open Market Committee to keep interest rates on hold until mid-2010 or later, though interest-rate futures markets are pricing in an increase earlier in 2010.
The most significant outcomes of the Fed's last two policy meetings concerned the central bank's purchases of US government and mortgage-related debt.
The Fed stopped buying longer-term Treasury debt last week, while the mortgage-related asset purchase program has been extended into early 2010 to provide for an orderly wind down.
"Things are going to start to get interesting in 2010, but for the moment they've got all their ducks in a row," Stanley said.
The Fed will note that the economy grew in the third quarter, snapping a deep four-quarter plunge and likely ending the US recession.
The officials are also likely to repeat there is still enough slack in the economy for inflation not to be an immediate worry.
Source:China Daily
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