The risk of new recessionary bottom increased during last six months, claims the president of the Federal Reserve in Chicago Charles Evans. New recessionary bottom is still the most likely scenario to the U.S. economy, but I am concerned about the strength of the recovery, “he said. High unemployment and a strong housing sector concerned do so fragile recovery, says Evans. It provides that unemployment, now 9.5 percent, remain high in the foreseeable future. Against this background, he said, ultra-expansionary monetary policy the Fed is appropriate. Evans argues that the securitization process by which mortgage loans are converted into packets of bonds sold to investors, reducing the incentive for creditors in the restructuring of troubled home loans. He said efforts to restructure these loans to prevent defaults are “drop in the ocean. Securitization appears a conflict between the interests of creditors and those companies serving the process, he says. The U.S. housing market collapse is already three years as construction is only 25% of their peak levels, and prices fell sharply across the country. Many economists fear that without the driving force behind the housing sector, economic recovery will take longer than usual. Shortly after Evans comments were exported data for sales of existing homes in the U.S. fell more than expected to 27.2 percent on a monthly and 25.5 percent yoy in July, reaching its lowest level since data began to be kept in 1999
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The unemployment rate in the U.S. is expected to remain well above 7 percent by the end of 2012 and throughout the term of the current U.S. president Barack Obama. It said Federal Reserve Chairman Ben Bernanke before Congress, said New York Times. He will need time to recover all the 8.5 million jobs, removed during the recession in the U.S. in 2008 and 2009. Ben Bernanke is concerned that the economic outlook and financial conditions in the country remain unusually uncertain, and warns that the fiscal crisis in Europe has become an obstacle to economic growth in recent months. Speaking on the occasion of his presentation was a semi-annual monetary policy report to the Federal Reserve to Congress. Analysts say his tone is become much more cautious than the presentation of the last report in February. Bernanke confirmed in his speech that the economic expansion that began in mid 2009, continues but with lower rates. That contributes significant support from governments and central banks with their common fiscal and monetary policy. He expects that the growing demand of households and businesses will help sustain growth, despite incentives from the government will have less effect.
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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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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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The Federal Reserve Chairman Ben Bernanke defended his post and taken steps under his leadership from the central bank in the U.S. to fight economic and financial crisis. Bernanke made the statement before the Senate, which must consider his candidacy for a second four-year term until the end of December. Under his leadership, the Federal Reserve cut the key rate in the United States to levels close to zero and set aside 3 trillion. dollars to strengthen the financial system. Bernanke warned that lower interest rates can not be changed prior to the careful analysis and assessment of the economic situation. He added that the Federal Reserve will implement the strategy of tightening monetary policy in such a way as to encourage job creation and to maintain price stability in the country. Some of the MPs in the Senate believe that the reelection of Bernanke will become the right message to the financial markets. Others, however, vehemently criticized the measures taken by the Federal Reserve steps forward BBC. Ben Bernanke’s mandate expires at the end of January. U.S. President Barack Obama nominated him for another term as chairman of the Central Bank of the United States in August, but his reappointment must be confirmed by the Senate.
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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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