As more signs point to a US economy that is sinking fast, the US Federal Reserve is struggling to find ways to reignite growth even as confidence wanes among consumers, businesses and banks, analysts say.
As the Fed unveiled a series of efforts to get credit flowing after stunningly weak labor data, some analysts said the central bank's efforts may have little positive impact and threaten to erode its inflation-fighting credentials.
Recession fears were stoked by Friday's report that the US economy lost 63,000 jobs last month in a second month of declining employment.
The weaker-than-expected report boosted the odds of another cut in interest rates by the Fed, which has already slashed its federal funds target from 5.25 percent in September to 3.0 percent.
The Labor Department report was released minutes after the Fed announced actions to pump more liquidity into the distressed banking system, which is reeling from a horrific slump in housing and tighter credit, in a further threat to economic growth.
But some say the Fed is losing a grip on efforts to jumpstart the economy.
"Banks don't need incentive to borrow as much as they need incentive to lend," said Kevin Giddis, an analyst at Morgan Keegan.
"We are in an unprecedented real estate and credit crisis that is whipping its way through the US economy like a midwestern tornado," he said.
Fred Dickson, market strategist at DA Davidson & Co, said the interest rate cuts are failing to help spur economic activity and that the Fed "should stop cutting rates."
"The rate cuts simply aren't working and result in putting more pressure on the dollar and oil prices, which is compounding the problems in the credit market and the economy," Dickson said.
Ethan Harris, an economist at Lehman Brothers, said the collapse of the US dollar while gold and oil have surged to records are potential inflation indicators that threaten confidence in the Fed, but predicts the central bank will regain the upper hand.
"We believe that loss of confidence will be short-lived -- as the economy and commodity markets weaken both actual and expected inflation will likely fall," Harris said.
Still, Harris said the US will be unable to avert recession because the Fed's rate cuts and the US$168 billion economic stimulus passed by Congress will take time have an impact.
"We are now penciling in a recession in the first half of 2008 and have trimmed our already very anemic recovery figures," he said.
"The feeble economy should ease inflation over time," he said.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure