FRANKFURT (Dow Jones) – The U.S. monetary authorities to Fed Chairman Ben Bernanke have decided to face a weak labor market and growing concern over the economic prospects of a small but symbolically significant step to boost the economy . ( Reuters photo 🙂
As the Federal Open Market Committee ( FOMC ) of the Federal Reserve announced on Tuesday , the portfolio held by the Fed through the purchase of government bonds at around 2 trillion USD stable. In addition, the FOMC expressed skepticism about the economic and held against this background, sticking to its zero interest rate policy. Observers do not rule out that there will follow more expansionary steps if the situation continues to deteriorate.
As the Panel announced after its meeting , the prime rate remains at record low of 0.00 % to 0.25 %. This met the expectations of the financial markets. The less important discount rate was kept at 0.75 %. The monetary authorities reiterated their assertion that the policy rate would remain "well for a long time at an exceptionally low level. " Interpret this formula with "at least for six months . " The economic situation , the low utilization of capacity, the subdued inflation trend and stable inflation expectations to justify a continuation of low interest rates, they say.
The decision was a vote against. As expected, once again voted the President of the Federal Reserve Bank of Kansas City, Thomas Hoenig, against the Niedrigzinsversprechen . In his estimation , this one narrows the scope of the Fed. He also voted against the decision to downsize the Fed ‘s portfolio can not .
The U.S. Federal Reserve assessed the economic development in the United States skeptical than last. "The point since the FOMC meeting in June, incoming information indicates that slowed the pace of recovery in output and employment in recent months, " says the statement. In the previous meeting of the FOMC had said that the economic recovery would continue , and the labor market is gradually improving. The Panel expected but still a gradual return to a higher resource utilization in an environment of stable prices, "even if the pace of economic recovery will probably remain short term or moderate as expected ".
The FOMC continues to expect a subdued inflation. The underlying inflation had slowed in recent quarters the trend. "With a substantial underutilization of capacity, holding back the cost pressure, and stable long-term inflation expectations of inflation should remain depressed for some time , " says the statement.
To support the economic recovery in the context of price stability, the Panel decided to hold the securities holdings of the Federal Reserve to its current level. According to the Federal Reserve of New York, the operational arm of the Federal Reserve , should the Fed ‘s balance sheet at USD 2.054 Bill remain constant. This will be achieved according to FOMC because the repayments are mortgage- backed securities ( "agency mortgage- backed securities ) and debt obligations of mortgage lenders (the "agency debt " ) längerlaufende reinvested in government bonds.
The announcement by the Fed to leave its securities portfolio is unchanged , observers have noted that although only a small step , but with symbolic effect : Due to the reinvestment of funds is an automatic contraction of the securities portfolio avoided , thus preventing a slight tightening of monetary policy. In the opinion of Michael Feroli , economist at JP Morgan Chase shows, the small relaxation step that the Fed " is very concerned about the sustainability of the recovery . " This was a clear signal that the Fed still sees the need to support the economy .
Economists from Barclays will assume that it is now increasingly provide more extensive speculation about the Fed’s expansionary policies in the coming sessions. The announced reinvestment of the proceeds of Agency bonds and MBS should not give the economy much drive , it says. If the economic outlook deteriorate further, " the Fed will likely usher in a new round of investment buying , " Barclays economists expect .
Similarly, said Bernd Steiner pastures , an economist at Commerzbank. "Overall, it looks as if the Fed is playing for time , "said Steiner grazing decisions of the Fed. Apparently the FOMC hope that the currently " very great uncertainty, " Bernanke said of the recent , up to the next meetings somewhat diminish . It would probably depend ultimately on the economic data, whether the Fed administer a new dose of expansionary monetary policy. " A more quantitative easing is therefore by no means a foregone conclusion already , "said Commerzbank economist . Clear in any event , that the exit was suspended from the expansionary monetary policy now .
Also UniCtredit economist Harm Bandholz described the decision by the Fed, the proceeds of its stock to reinvest in bonds, as "Exit by Exit ". The effect of the announced relaxation step , the economist , however, considers to be limited . The psychological effect is larger , however , because now – expected in the case of a deteriorating economic situation – a resumption of quantitative easing would .
The market expectations for a first rate hike by the Fed has shifted because of the uncertain economic outlook, further back. After the rate decision in terms of the Fed funds futures now a rate hike by the Fed in the first half of 2011 is priced in a probability of 10%. Before the announcement , the corresponding probability was still estimated at 28%.
– By Katrin Haertel , Dow Jones Newswires , +49 (0 ) 69 29 725 300
konjunktur.de @ dowjones.com
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