|
Mortgage News |
We're about Mortgage News You Can Use
Fed Looks to Stand Pat on Interest Rates
By Alister Bull WASHINGTON (Reuters) - Disappointed by weak December payrolls data, the Federal Reserve will hold interest rates steady at a 45-year trough this week and restate its view that they can stay low for some time to come, economists say. At the end of a two-day meeting on Wednesday, the policy-making Federal Open Market Committee is expected to reiterate an assurance that policy accommodation can be maintained for ``a considerable period'' to bolster self-sustaining growth. Reuters' latest poll sees the overnight rate the Fed controls edging up from 1 percent, where it has been since June, to 1.5 percent by the end of 2004. But some economists would not be surprised if it stayed pat for a year ``The Fed can be very patient. There is not one thing it needs to do here at all ... we are potentially a year away'' from the first rate hike, said Dana Johnson, head of research at Banc One Capital Markets Inc. Fed officials have stressed inflation remains well under wraps thanks to slack in the economy, despite a stellar third quarter in which the economy advanced at an 8.2 percent annual rate, the fastest in nearly 20 years. SCANT NEW JOBS While a long slide in employment drew to an end in July, only 278,000 jobs have been created since then and just a scant 1,000 December. Economists say jobs growth of about 150,000 is needed each month just to keep pace with population growth. In addition, much of industry still lays idle over two years after the United States climbed out of recession. A weakening dollar -- down another 5 percent since the last FOMC meeting on Dec. 9 -- gives officials something to think about. Still, they keep emphasizing that the dollar's drop has not hurt the economy so far. Fed Chairman Alan Greenspan showed little concern at the currency's weakness when he told bankers in Berlin on Jan. 13 that it did not appear to be igniting inflation. ``Inflation, the typical symptom of a weak currency, appears quiescent,'' he told a Bundesbank seminar. Greenspan will speak again on Feb. 11 when he delivers bi-annual testimony on monetary policy before the House of Representatives Financial Services Committee. WHAT'S CHANGED Some Fed officials have expressed surprise that December did not show more jobs growth despite ample evidence the economy is growing strongly, but analysts say this won't prompt a strong reaction from the policy-setting committee. ``It is not in their best interests to tweak their statement on the basis of one month's numbers,'' said Carey Leahey, senior U.S. economist at Deutsche Bank Securities Inc in New York. Since the last FOMC meeting, a steady trickle of good economic news has been overshadowed by the weak jobs report, which was a blow to widespread hopes growth would have given more of a lift to employment by now. But Fed officials have argued against putting too much store in one month's number and have taken note of contradictory evidence offered by other employment data, including an unemployment rate that fell to 5.7 percent in December, well off its recent peak of 6.3 percent in June. Inflation also remained mute with consumer prices posting a 0.2 percent rise in December, while core prices, excluding volatile food and energy, rose just 0.1 percent. The core rate has risen just 1.1 percent over the past 12 months, matching the advance through November as the slowest in just under 38 years. In addition, retail sales undershot forecasts with a 0.5 percent rise last month, half of the gain seen in November. But housing starts rose a better than expected 1.7 percent last month to close out the best year since 1978 as low interest rates spurred the sector. ``Our house view is for a (quarter percentage) point rise in June but I think that the chances of them not doing anything at all this year are about 40 percent,'' said Leahey. © 2004 Reuters Back to Original Article: Mortgage News You Can Use
Continue with:Bush withdraws mortgage regulator nomineeHome Resales in U.S. Rise to 6.47 Million Rate, Ending Best Year on RecordGreenspan is confident lost jobs will be replacedCBO Projects Record DeficitWeak Dollar Helps U.S. Firms, for NowU.S. Budget Office Deepens Fiscal Gloom for BushU.S. Budget Office Deepens Fiscal Gloom for Bush Part TwoTreasuries in No Mood for Risk Before FedRates on Short-Term Treasury Bills RiseClinton Criticizes Bush Administration On EconomyGreenspan: Flexible economy will replace jobsUS Treasury's Snow: Global growth to top G7 agendaUS TREASURY OUTLOOK-Consumer mood is market focusWhat the Fed is considering at FOMC meetingHill budget office sees 10-year deficits totaling nearly $2.4 trillionDollar Trade Choppy Before G7 MeetingMajor business and economic eventsEconomic growth could be derailed by soaring energy prices
|