The US Federal Reserve chief has vowed to take aggressive steps to boost the US economy as growth slowed rapidly in the second quarter.
However, Ben Bernanke, the central bank chairman, said on Friday prospects for a pick up in economic expansion next year appeared to remain despite the sharp government cutback on Friday of economic growth in the April to June period, to 1.6 percent.
The growth revision, down more than half from 3.7 percent in the first quarter came on the heels of a massive trade deficit and weak private inventory investment, signaling a more pronounced slowdown in recovery from recession.
The White House acknowledged on Friday the lowered estimates meant more work was needed to keep the recovery on track.
“Four consecutive quarters of economic growth is positive news, but the revised numbers mean there is still much more we need to do to continue on the path to recovery,” said a senior administration official with US President Barack Obama, who is vacationing in Massachusetts.
The Federal Open Market Committee “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” Bernanke said.
It was his strongest signal yet that the central bank could resume massive purchases of longer-term debt if the economy worsened, adding to the Federal Reserve’s already bloated balance sheet.
Speaking at an annual central bank gathering in Jackson Hole, Wyoming, Bernanke said the Fed had adequate weapons in its arsenal to jolt the economy from any sharp slowdown, brushing off criticism by some analysts that it has been pushed to a corner.
“The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation,” he said. “We do ...”
“The issue is instead whether, at any given juncture, the benefits of each tool, in terms of additional stimulus, outweigh the associated costs or risks of using the tool,” he said.
The Fed has already pumped hundreds of billions of dollars into the economy since a home mortgage meltdown triggered the worst financial crisis in decades and plunged the economy into recession in December 2007.
The central bank has also slashed interest rates to virtually zero to spur growth, which spurted late last year before staggering again.
Bernanke’s assurances in his closely watched speech helped assuage market concerns.
Wall Street shares rebounded after sliding mostly this week, with the blue-chip Dow index jumping 164.84 points or 1.65 percent to 10,150.65, rebounding from Thursday’s close below the 10,000 psychological threshold.
While acknowledging that growth and employment were slowing to levels not expected by the central bank, Bernanke was careful to rule out the possibility of the world’s largest economy slipping back into recession.
“I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace,” he said.
Most recent economic data fell below already modest expectations and economists are reducing their growth forecast for the third quarter, with some warning of a “double-dip” recession.
New home sales plunged to the lowest levels in half a century and the pace of orders for goods indicated the manufacturing sector slowed markedly, with business capital spending contracting massively.
Unemployment at 9.5 percent is the biggest concern as it has curtailed consumer spending, a key growth driver, and sent other equally important sectors reeling.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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