The U.S. Federal Reserve will probably raise its main interest within six months, with between a quarter and half percentage points, according to a survey of the National Association of Business Economics (NABE), said. According to the survey, conducted every six months, most of NABE economists find this almost zero interest rate the Fed is appropriate. More and more of them, however, feel that it is too stimulating. “The majority believes that the increase in interest rates over the next six months is as likely and appropriate,” said NABE president Lynn Riyzar. According to the Fed’s high unemployment and low inflation to justify keeping interest rates extremely low for an extended period. The data indicate that the economy has gradually recovered and by some leaders of the Fed Reserve needs to start preparing the markets for the tightening of financial conditions. Economists interviewed by NABE, believe that the suspension of purchases of mortgage securities by the Fed will increase interest rates on mortgage loans with an average of 42 basis points. The program, worth 1.25 trillion. dollars, will be discontinued at the end of the month. 44% of the respondents believe that inadequate regulatory oversight was the main reason for the deep financial crisis, which led the country to a painful recession.
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The U.S. central bank began tightening cycle of monetary policy. This happened quite a surprise, since no signals were given prior to such intentions. Policy on withdrawal of money from the system began with an increase in the discount rate that commercial banks pay the Fed on its direct loans from the central bank. He was raised by a quarter percentage point to 0,75 percent. Among the reasons the central bank is that commercial banks must rely more heavily on money markets to raise the necessary funds, rather than resorting to the services of the Fed. These changes are considered as a step toward normalization of credit facilities the Fed,” says the official release of the institution. “No change is expected to lead to further tightening in financial conditions for households and businesses and they are not intended to signal a change in the outlook for the economy or monetary policy,” the Fed explained. After news of the dollar shot up sharply since the central bank’s actions are perceived by the market as a signal that is to tighten monetary policy. The dollar jumped to a level of 1,3485 EUR / USD, as at an earlier stage had reached a level of 1,3444 EUR / USD.
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The price of oil recorded several sharp movements in the past day. The black gold initially rose significantly, passing over 79 dollars a barrel, then retreated with quotes around the dollar. As part of yesterday’s session of the New York Stock Exchange with oil delivery in March rose by 2,2 percent to 79.06 dollars per barrel, the highest close since 14 January. It came because of the temporary stabilization of the euro, which has triggered interest in investing in commodities. Late in the evening, however, the U.S. Federal Reserve raised the discount rate by a quarter percentage point to 0.75 percent, which acted as a powerful catalyst for the dollar. Thus, the dollar rose to 1,3485 EUR / USD, after yesterday the euro was more than 100 pips more. This led to reduced interest in investing in raw materials and oil prices fell with 1,3 per cent to just over $ 78 a barrel. The Exchange in London yesterday of Brent crude oil with delivery in April rose by 2 percent to 77.78 dollars per barrel.
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Future of Ben Bernanke, who on 31 January to appear in the U.S. Senate to be reelected for a second term in office of President of the U.S. Federal Reserve (Fed), is less certain, says the online edition of the WallStreet Journal. At the end of last week the number of senators who will vote against the increase, incl. and members of the Democratic Party. Fed is subjected to very severe criticism over its policy during the passing decade of this century. According to the Financial Times the charges were for common monetary policy for financial market deregulation, weak control over the banks, which has indeed led to the emergence of the financial crisis. However, many legislators are unhappy with the actions of the U.S. central bank and specifically by Bernanke and himself during the crisis, incl. and rescue of the banking system and specifically the insurance giant AIG, to whom was committed and guaranteed $ 180 billion public money. On Friday, the Democratic Party Senators Barbara Boxer and Ras Feynhold, who are partial elections for their eventual re-election, said they would vote against a second term of Bernanke. “The next chairman must not be associated with a failed financial policies of the recent past,” said Boxer to WallStreet Journal. According to the newspaper, referring to Dow Jones Newswires, for 15 senators have announced that Bernanke will not support (4 Democrats, 10 Republicans and one non-party), 26 senators, however, have announced that they will support it, while 59 does not have publicly announced comment. Bernanke needs 60 votes to get a second term.
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Most large U.S. banks will soon have to take public offerings if the Treasury require repayment of funds lent to them by the program to buy troubled assets (TARP), Reuters said banking analyst Richard Bouv. Earlier this month asked the Federal Reserve Banks, subject to “stress test” to come forward with plans to repay the amounts allocated in exchange for the issued preference shares in them. “In fact, all banks can easily redeem these securities of its cash balances, but only 3 of the top 30 banks would be left with adequate Tier if they do,” explains Bouv. It is believed that the Treasury aims ratio Tier assets to 12 percent, which means that banks will be forced to raise capital without government assistance before they are allowed to repay the funds under the program continues Bouv. “It stirs the thought that some banks would rather have public offerings, although their profits are in doubt.” Rochdale Securities analyst said that the swell of the U.S. budget deficit, which is expected to reach 9.5 percent of GDP in this fiscal year and the drop-down dollar, forcing the government to obtain funds where possible. Collection of funds awarded through the TARP program is one of the possible sources, according Bouv. Many banks want to return the funds received under the program, which was worth 700 billion dollars as participation in it is associated with restrictions on expenditure on salaries, dividends and redemptions.
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The former Federal Reserve Chairman Alan Greenspan said the U.S. believes that America does not need a new plan to stimulate the economy. Moreover, the specialist believes that before it comes to positive news about the labor market, unemployment in the country probably will reach 10 percent. Greenspan indicates that there are at least two reasons not to consider ideas for developing a new rescue plan. One is that only 40 percent of the projected under the current plan funds were allocated to the economy. Others relate to the debate on the effectiveness of such plans and disputes whether they are needed, writes Market Watch. The specialist believes that, some signals to improve the economy of the country. However, labor markets remain under pressure and unemployment will likely continue to grow in the short term, Greenspan believes.
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