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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (50232)	5/20/2009 6:20:23 PM
From: Riskmgmt	Read Replies (1) \| Respond to of 217868

OK TJ, put down the "unreal tournament iii for a minute. I need your brains to help me get this straight. They saying they may need to put more money in to buy stuff the banks can get rid of This is bad,no? secure a stronger economic recovery. This is good-no? The whole thing reads like one of Alan Greenspan wrote it gives me a headache. can you tell me what it means and whether I should be happy or sad? :} "http://www.bloomberg.com/apps/news?pid=20601087&sid=aA0d0AcDBkqU&refer=home Fed Officials Raised Prospect of More Bond Purchases (Update2) Share \| Email \| Print \| A A A By Craig Torres May 20 (Bloomberg) -- Some Federal Reserve officials judged last month that the central bank may need to boost its purchases of assets to secure a stronger economic recovery, while all policy makers agreed to hold off on such a move at the time. “Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery,” minutes of the April 28-29 Federal Open Market Committee meeting showed today in Washington. “All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train” before making a decision. U.S. central bankers cited a slower pace of contraction in their April statement, leaving the benchmark interest rate trading in a range of zero to 0.25 percent. They cited improved financial conditions, stronger sentiment from businesses and households and expectations of an increase in industrial production to replace inventories. “Committee members agreed that the Federal Reserve’s large-scale securities purchases were providing financial stimulus that would contribute to the gradual resumption of sustainable economic growth,” the minutes said. “Members also agreed that it would be appropriate to continue making purchases” in the total amount of $1.75 trillion previously announced. Ten-year Treasury yields fell for the first time in four days on expectations the Fed will purchase more government securities. The yield on the 10-year note fell six basis points to 3.19 percent as of 4:12 p.m. in New York. A basis point is 0.01 percentage point. Growth Forecast Cut Fed governors and district-bank presidents cut their projections for economic growth in quarterly forecasts submitted at the meeting. They foresaw a deeper contraction in 2009 and a weaker recovery in 2010, with the unemployment rate projected to remain at 9 percent or higher through next year. FOMC members also saw “some signs pointing toward economic stabilization,” and some officials detected prospects for “a trough” in the housing market’s downturn. “The Fed wants to be as flexible as possible because the dynamics of the economy and monetary policy have never been this complex,” said Mark Spindel, who manages more than $100 million at Potomac River Capital LLC in Washington. Currency Swaps By unanimous vote, the committee extended currency swaps with the Bank of Canada and the Banco de Mexico for an additional year, beginning in mid-December 2009. The swap with the Bank of Canada is $2 billion, and the swap with Mexico’s central bank is $3 billion. The arrangements are standing programs related to the North American Framework Agreement of 1994, and differ from the temporary swap lines created last year. A firming in consumer confidence, industrial production and other areas of the economy indicate the worst U.S. recession in five decades may be easing. Output at factories, mines and utilities decreased 0.5 percent last month after dropping 1.7 percent in March, Fed figures showed last week. “Participants continued to see significant downside risks to the economic outlook,” the minutes said. “While financial strains and risk spreads had lessened somewhat over the intermeeting period, participants agreed that the global financial system remained vulnerable to further shocks.” A gauge of confidence among U.S. consumers rose to 67.9 in May from 65.1 in April, according to the Reuters/University of Michigan preliminary index of consumer sentiment. Payrolls shrank last month by the least since October, falling 539,000 after declining 699,000 in March. Economy Contracting The economy is contracting at a 1.1 percent annual pace in the second quarter, according to estimates from Macroeconomic Advisers LLC, compared to a 6.1 percent annual rate of decline in the first three months. Central bank governors and regional bank presidents presented a new set of forecasts at the April meeting. Their central tendency ranges project the economy will shrink 1.3 percent to 2 percent this year and grow 2 percent to 3 percent in 2010. That compares with forecasts in January of a contraction this year of 0.5 percent to 1.3 percent and growth of 2.5 percent to 3.3 percent for 2010. The officials forecast inflation, minus food and energy, will rise 1 percent to 1.5 percent this year and 0.7 percent to 1.3 percent next year. That compares to a January core personal consumption expenditures price index forecast of 0.9 percent to 1.1 percent for 2009 and 0.8 percent to 1.5 percent in 2010. Unemployment Rate Central bankers forecast the unemployment rate at 9.2 percent to 9.6 percent this year and 9 percent to 9.5 next year. That compares with forecast ranges of 8.5 percent to 8.8 percent for 2009 and 8 percent to 8.3 percent for 2010 in January. The Fed has expanded assets on its balance sheet by $1.3 trillion over the past year to $2.2 trillion to replenish liquidity, narrow credit spreads and support borrowing and spending. “It is about time for the financial markets to stand on their own to a greater degree than they have,” Catherine Mann, an economics professor at Brandeis University and former Fed Board economist, said in a Bloomberg Television interview. “So long as the Federal Reserve sits as a backstop, as the buyer of last resort, or buyer of first resort in some cases of these assets, then the financial system really won’t get back into the game,” she said. The central bank said yesterday that in July it will begin accepting commercial mortgage-backed securities issued before Jan. 1 into the Term Asset-Backed Securities Loan Facility, which provides financing to investors in asset-backed securities backed by consumer and business loans. Profit Growth The Standard & Poor’s 500 index is up about 1 percent for the year on forecasts for better profit growth in quarters ahead. The cost of three-month dollar loans between banks in London has fallen for more than a month to 0.72 percent from 1.42 percent on Dec. 31, 2008, as confidence in financial institutions improves. The cost of a 30-year fixed rate U.S. mortgage fell to 4.86 percent on May 14 from 5.1 percent at the start of the year, according to Freddie Mac’s poll of a 125 lenders. The Fed’s securities purchase program hasn’t prevented yields on U.S. notes from rising. Ten-year Treasury yields are up from 2.53 percent March 18 when the central bank said it would buy $300 billion of government debt over six months.