Friday, May 27, 2005
Fed officials warn of further rises
Amercian Federal Reserve officials left little doubt that the bank has more rate increases in mind, but tightening of monetary policy looks likely to continue in small steps unless inflation flares up.
Approaching the first anniversary of the Fed‘s program of "measured" increases in short-term rates, Chicago Fed President Michael Moskow said the bank‘s policy remains accommodative.
Separately, Atlanta Fed President Jack Guynn said the Fedhas "not yet reached a neutral policy stance."
Fed Gov. Edward Gramlich, speaking in Paris, said the measured rate increases could continue.
The federal funds rate is currently 3.0 per cent, up from 1.0 per cent when the bank started its program of raising rates in June 2004.
The 3 percent to 5 percent zone is often described as a neutral "range" for federal funds, although Fed officials dislike being pinned down on a specific level. A neutral rate neither stimulates nor suppresses economic growth.
Echoing Supreme Court Justice Potter Stewart‘s famous comment on obscenity, Fed Chairman Alan Greenspan said of neutrality last week, "We‘ll know it when we see it.
The economy is on a solid growth path, with future growth likely to be in the vicinity of the 3.5 percent reported for the first quarter, he said.
Despite high energy prices, core U.S. inflation remains lowand longer-term inflation expectations are well contained,policy-makers said.
The U.S. central bank was not yet done raising interest rates but would watch economic data closely and stay vigilant to any surge in inflation.
Federal Reserve Governor Susan Bies took on the "conundrum"of low long-term U.S. interest rates in comments to reporters after speaking at a Women in Housing and Finance event inWashington.
Longer maturity interest rates have fallen sharply since the Fed embarked on its tightening program at the short end ofthe yield curve. Yields on 10-year notes are currently at 4.08 per cent, down from about 4.70 per cent in June 2004 when the Fed started raising rates.
The long rates puzzle dovetails into another worry forpolicy-makers, a hot housing market that has recently attracted the kind of speculative cash associated with stock market bubbles of yore.
Officials repeated concerns about real estate speculation but once again stopped short of tagging the current situation a"bubble."
Approaching the first anniversary of the Fed‘s program of "measured" increases in short-term rates, Chicago Fed President Michael Moskow said the bank‘s policy remains accommodative.
Separately, Atlanta Fed President Jack Guynn said the Fedhas "not yet reached a neutral policy stance."
Fed Gov. Edward Gramlich, speaking in Paris, said the measured rate increases could continue.
The federal funds rate is currently 3.0 per cent, up from 1.0 per cent when the bank started its program of raising rates in June 2004.
The 3 percent to 5 percent zone is often described as a neutral "range" for federal funds, although Fed officials dislike being pinned down on a specific level. A neutral rate neither stimulates nor suppresses economic growth.
Echoing Supreme Court Justice Potter Stewart‘s famous comment on obscenity, Fed Chairman Alan Greenspan said of neutrality last week, "We‘ll know it when we see it.
The economy is on a solid growth path, with future growth likely to be in the vicinity of the 3.5 percent reported for the first quarter, he said.
Despite high energy prices, core U.S. inflation remains lowand longer-term inflation expectations are well contained,policy-makers said.
The U.S. central bank was not yet done raising interest rates but would watch economic data closely and stay vigilant to any surge in inflation.
Federal Reserve Governor Susan Bies took on the "conundrum"of low long-term U.S. interest rates in comments to reporters after speaking at a Women in Housing and Finance event inWashington.
Longer maturity interest rates have fallen sharply since the Fed embarked on its tightening program at the short end ofthe yield curve. Yields on 10-year notes
The long rates puzzle dovetails into another worry forpolicy-makers, a hot housing market that has recently attracted the kind of speculative cash associated with stock market bubbles of yore.
Officials repeated concerns about real estate speculation but once again stopped short of tagging the current situation a"bubble."
# posted by Dr Search- Principal Consultant at the Search Clinic @ 1:58 PM 0 comments
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Wednesday, May 25, 2005
Yields drop on FED minutes
Bond prices rose Tuesday, as traders found little of concern in the minutes of a meeting by Federal Reserve policymakers.
The price of the benchmark 10-year Treasury note rose 9/32 point, or $2.81 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 4.03 percent compared with 4.06 percent late Monday.
The 30-year Treasury bond rose 7/16 point to yield 4.36 percent, down from 4.38 percent a day earlier, according to Moneyline Telerate.
The rise in bond followed the release of minutes from the Fed's May 3 meeting, which had been highly anticipated by the market. The text showed policymakers were concerned about inflation and an economic slowdown, but still believed interest rates could be increased gradually.
The Dow Jones industrial average fell 20 to 10,504. The Standard & Poor's 500 index rose by less than 1 point to close at 1,194. The Nasdaq composite index gained 5 to 2,062.
In other trading, the benchmark 2-year note rose 1/16 point to yield 3.59 percent, down from Monday's 3.62 percent. Intermediate maturities rose between 3/32 point and 15/32 point.
Yields on one-month Treasury bills were 2.69 percent as the discount rose 0.04 percentage point to 2.64 percent. Yields on three-month Treasury bills were 2.94 percent as the discount rose 0.03 percentage point to 2.88 percent. Six-month yields were 3.18 percent, as the discount rose 0.02 percentage point to 3.08 percent.
Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.
The federal funds rate, the interest on overnight loans between banks, was unchanged from late Monday at 3 percent.
The price of the benchmark 10-year Treasury note rose 9/32 point, or $2.81 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 4.03 percent compared with 4.06 percent late Monday.
The 30-year Treasury bond rose 7/16 point to yield 4.36 percent, down from 4.38 percent a day earlier, according to Moneyline Telerate.
The rise in bond followed the release of minutes from the Fed's May 3 meeting, which had been highly anticipated by the market. The text showed policymakers were concerned about inflation and an economic slowdown, but still believed interest rates could be increased gradually.
The Dow Jones industrial average fell 20 to 10,504. The Standard & Poor's 500 index rose by less than 1 point to close at 1,194. The Nasdaq composite index gained 5 to 2,062.
In other trading, the benchmark 2-year note rose 1/16 point to yield 3.59 percent, down from Monday's 3.62 percent. Intermediate maturities rose between 3/32 point and 15/32 point.
Yields on one-month Treasury bills were 2.69 percent as the discount rose 0.04 percentage point to 2.64 percent. Yields on three-month Treasury bills were 2.94 percent as the discount rose 0.03 percentage point to 2.88 percent. Six-month yields were 3.18 percent, as the discount rose 0.02 percentage point to 3.08 percent.
Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.
The federal funds rate, the interest on overnight loans between banks, was unchanged from late Monday at 3 percent.
# posted by Dr Search- Principal Consultant at the Search Clinic @ 11:57 AM 0 comments
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Tuesday, May 24, 2005
Bush seeks cuts to meet deficit pledge
President George W. Bush challenged Congress yesterday to cut domestic spending in an effort to meet his pledge to halve the US deficit by the time he leaves the White House.
In the toughest budget request of his presidency, Mr Bush called for savings at the departments of education, transport, housing and urban development and at the Environmental Protection Agency.
With a 4.8 per cent increase, to $419bn (€328bn, £225bn), at defence, the proposals would cut discretionary domestic spending outside national security by 0.7 per cent. Overall discretionary spending, with an increase of 2.1 per cent, would also be kept below the rate of inflation. Mr Bush called it "a budget that sets priorities. Our priorities are winning the war on terror, protecting our homeland, growing our economy."
But experts warned that the president's proposed restraint in only a small part of government would be insufficient to bring the US deficit under control. Mandatory spending, including pensions and healthcare for the elderly and poor, now represents more than half of government outlays and costs are rising fast.
The programmes targeted by Mr Bush - discretionary spending, excluding defence and homeland security - represent less than 20 per cent of total spending.
The White House forecasts a deficit of $427bn for 2005, falling to $233bn by 2009. These estimates do not include the cost of the operations in Iraq, the possible transition costs of reforming Social Security, or of fixing the alternative minimum tax - a levy for the rich that will start to encroach on the middle classes.
Democrats said that the administration's second-term goals - extending the tax cuts of its first term and reforming Social Security - would start to damage the fiscal outlook after 2009.
There was also a risk that Congress showed even less restraint than the president, experts said.
One proposed cut that the Congress is unlikely to accept is to ending support for Amtrak, the national rail service. Last year's subsidy of $1.2bn was granted despite calls from the president to cut it to $900m. So far, Mr Bush has never backed his calls for fiscal restraint by using his presidential veto to block a spending bill.
During his first term, overall spending rose at its fastest rate since the mid-1970s, according to the Office of Management and Budget - by 7.9 per cent in 2002, 7.4 per cent in 2003, 6.1 per cent in 2004 and 8.2 per cent in 2005.
Spending growth has averaged 7.4 per cent a year under Mr Bush compared with 3.5 per cent under Bill Clinton, his predecessor.
In the toughest budget request of his presidency, Mr Bush called for savings at the departments of education, transport, housing and urban development and at the Environmental Protection Agency.
With a 4.8 per cent increase, to $419bn (€328bn, £225bn), at defence, the proposals would cut discretionary domestic spending outside national security by 0.7 per cent. Overall discretionary spending, with an increase of 2.1 per cent, would also be kept below the rate of inflation. Mr Bush called it "a budget that sets priorities. Our priorities are winning the war on terror, protecting our homeland, growing our economy."
But experts warned that the president's proposed restraint in only a small part of government would be insufficient to bring the US deficit under control. Mandatory spending, including pensions and healthcare for the elderly and poor, now represents more than half of government outlays and costs are rising fast.
The programmes targeted by Mr Bush - discretionary spending, excluding defence and homeland security - represent less than 20 per cent of total spending.
The White House forecasts a deficit of $427bn for 2005, falling to $233bn by 2009. These estimates do not include the cost of the operations in Iraq, the possible transition costs of reforming Social Security, or of fixing the alternative minimum tax - a levy for the rich that will start to encroach on the middle classes.
Democrats said that the administration's second-term goals - extending the tax cuts of its first term and reforming Social Security - would start to damage the fiscal outlook after 2009.
There was also a risk that Congress showed even less restraint than the president, experts said.
One proposed cut that the Congress is unlikely to accept is to ending support for Amtrak, the national rail service. Last year's subsidy of $1.2bn was granted despite calls from the president to cut it to $900m. So far, Mr Bush has never backed his calls for fiscal restraint by using his presidential veto to block a spending bill.
During his first term, overall spending rose at its fastest rate since the mid-1970s, according to the Office of Management and Budget - by 7.9 per cent in 2002, 7.4 per cent in 2003, 6.1 per cent in 2004 and 8.2 per cent in 2005.
Spending growth has averaged 7.4 per cent a year under Mr Bush compared with 3.5 per cent under Bill Clinton, his predecessor.
# posted by Dr Search- Principal Consultant at the Search Clinic @ 9:34 AM 0 comments
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