Jun
26
Federal Reserve Bank leaves interest rates 2%
Filed Under Offshore News, banking Tags: central bank, interest rate —
Federal Reserve Bank (The United States central bank) leaves interest rates 2%
The United States Federal Reserve on Wednesday June 25th 2008 left a key interest rate unchanged as it shifted its focus to inflation control from US economic growth. Chairman Ben Bernanke and his team decided merely to talk tougher about inflation, signaling that they may lack the will to tighten money in an election year.
The United States central bank’s decision to hold the line interest rate cuts dating back to Aug. 7, 2007. During that span, the Fed cut the federal funds rate to two per cent, down from 5.25 per cent. The Federal Reserve said it expects inflation to moderate later in 2008 and 2009. Looks like United States central bank continues to run a highly accommodate monetary policy. The consumer real price index is rising at a rate roughly double the central bank funds rate. Annually producer prices in May were up 7.2%, and that’s before continued increases in the prices of fuel cost, energy, credit crunch, the housing slump and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains very high plunging consumer confidence push the economy toward a slowdown.
[It was only a couple of months ago that Frederic Mishkin, Donald Kohn and other Fed Governors were asserting that "inflationary expectations" were "anchored." In fact, those expectations are soaring, which means that they will soon begin to show up in wage demands and price increases throughout the economy. The more deeply those expectations become embedded, the harder they are to change and the more the Fed will have to tighten money to uproot them.] - from The Wall Street Journal
