Minneapolis Federal Reserve President Gary Stern spoke at the Capital City Partnership Annual Meeting in St. Paul, Minnesota on Thursday, offering a sliver of hope that actions by the Federal Reserve could help stabilize the financial markets.
Although the economy is likely to remain in recession for at least two more quarters, Stern predicted that healthy growth would return by the middle of 2010.
`In view of the state of the credit markets and of the housing sector, it seems a fair bet that it will take time for momentum to build,` he said in prepared remarks. `But with the passage of time - as we get into the middle of 2010 and beyond - I would expect to see a resumption of healthy growth.`
While he noted that it `remains unclear` if additional steps will be needed, Stern stated he is `guardedly optimistic` that the correct actions have been taken to boost liquidity in financial markets. Read the rest of this entry »
The Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association released a report to Treasury Secretary Timothy Geithner Wednesday, in which it discussed the need for additional funding.
The report claimed that the latest steepening in the yield curve may be a by-product of the Treasury`s outsized funding needs in 2009-2010.
Those outsized funding needs, the report said, reflect the dismal outlook for economic growth and Congress and the Administration`s efforts to bolster the economy through policy action.
The deterioration in the budget outlook, the report continued, combined with expenditures associated with the TARP, potential FDIC guarantees, and expected additional stimulus spending have increased private forecasts for total funding needs of the government for fiscal year 2009 to approximately $2 trillion. Read the rest of this entry »
The Federal Reserve announced Tuesday that it is extending the term of several lending facilities as well as swap lines with foreign central banks for an additional six months as credit markets remain strained. The extension through October 30th, 2009 adds a half year from the original expiration date of April 30th, 2009, `in light of continuing substantial strains in many financial markets,` the Federal Reserve said in a statement.
The bevy of lending facilities established over the past year plus represents a push from the nation`s policymakers to think outside the box in addressing what many argue is the greatest financial crisis since the Great Depression. The extension of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Money Market Investor Funding Facility (MMIFF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF) through October 30th will help credit markets as they struggle through the financial crisis. Read the rest of this entry »
Dallas Federal Reserve President Richard Fisher cautioned Monday that protectionist tendencies are dangerous, calling them the `crack cocaine` of economics.
Speaking on C-Span, Fisher addressed a proposed congressional fiscal stimulus law that would offer `Buy America` provisions in an effort to encourage the purchase of domestic goods. However, such provisions are dangerous, Fisher warned.
`Protectionism is the crack cocaine of economics … (it) leads to economic death,` he said.
`We just cannot afford to go down that path,` Fisher added. Read the rest of this entry »
Monday, French Finance Minster Christine Lagarde said that she would be very surprised if the economy grows in the current year.
Lagarde noted that the French economy contracted sharply in the fourth quarter of 2008 and the slowdown is expected to continue in the first quarter of 2009.
The minister also revealed that the government would be revising its outlook for 2009 from the current 0.2%-0.5% growth.
Further, the minister said the number of unemployed in December 2008 would be up by around 45,000. The European Commission had said in its interim forecast that the rate of unemployment is expected to increase to 9.8% in the current year and to 10.6% in the next year. Read the rest of this entry »
The New Zealand economy shrank for the third consecutive quarter in September 2008 and indicators pointed to further quarterly declines in December 2008 and March 2009, the Treasury said Monday.
`All indicators suggest the New Zealand economy will remain in recession until at least March 2009. As a result, growth appears to be developing in line with the December Update downside scenario, at least in the near term, with recent international developments pointing to further downside risk`, the Treasury stated.
The contraction in the September quarter highlighted continuing weakness in foreign and domestic demand. Annual average growth in production GDP dropped to 1.7% in September from 2.7% in June.
Annual inflation declined to 3.4% in December from 5.1% in September. Average prices eased nearly 20% in the December quarter on lower fuel cost. The medium-term outlook for inflation eased considerably, the Treasury stated.
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Friday, Reserve Bank of New Zealand Governor, Alan Bollard said there is still room for the central bank to cut the official cash rate, or OCR, further in response to adverse economic developments.
Bollard`s comments came a day after the central bank slashed its OCR by 150 basis points to 3.50%.
Addressing the Canterbury Employers` Chamber of Commerce, Bollard said, `Lest there be any doubt, the tool box is by no means empty.`
`We have done a lot already and it will take some time for these actions to have their full effects, but we are entering the year well positioned on the monetary policy, liquidity management and prudential policy fronts.`
Bollard noted that the economy is in the middle of a major international shock that is developing from financial turbulence into economic recession. Read the rest of this entry »
Weak opens are expected for the New Zealand and Australia sharemarkets on Friday, after U.S. stocks moved sharply lower overnight. Wall Street reacted negatively to data on sharply lower home sales and skepticism over the Obama economic stimulus plan.
Word of a bigger-than-expected interest rate reduction from the central bank helped send New Zealand stocks higher on Thursday.
Reserve Bank of NZ Governor Alan Bollard announced the bank cut its Official Cash Rate by 150 basis points to 3.50 percent, an all-time low for the OCR.
The resulting rally ran out of steam in later trading, however. The benchmark NZX 50 index ended at 2,770.12, up 22.22 points or 0.81 percent, but well off its highs. Read the rest of this entry »
The Federal Open Market Committee warned Wednesday that conditions in the credit markets are `extremely tight,` indicating that conditions have worsened since their December meeting. Voting to keep interest rates unchanged from their target range between zero and 0.25 percent, the Federal suggested that deflation could be a risk.
However, the policymaking branch of the Federal Reserve reiterated their preview statement that the severe recession is likely to keep the federal funds rate at `exceptionally low levels…for some time.`
The economy has weakened since the December meeting, the FOMC said. While consumers have cutback spending in the face of steep declines in industrial production, housing starts, and employment, there has been some sign of improvement in the financial markets as a result of government liquidity efforts, the Fed noted. Read the rest of this entry »
The number of unemployed could increase by 40 million in 2009, the ILO said Wednesday. The global financial meltdown has had an adverse effect on the employment situation throughout the world. As recession deepens in 2009, there seems to be no reprieve for the world`s unemployed.
The economic outlook for 2009 was bleak and the world economy was expected to grow just 0.9%. International trade had been adversely impacted by scarce inter-bank liquidity and risk re-assessment in 2008. The world economy grew 3.8% in 2008 according to the IMF. Growth in world merchandise trade slipped to 6% in 2007 after posting 8.5% growth in 2006. In 2008, import volumes declined 1.4% in the G7 countries in the second quarter, while exports dipped 0.3%. Further, all economic indicators in India, China and Russia were falling. Read the rest of this entry »