Record-low interest rates may give companies an incentive to take excessive risks that could be bad for the economy, the Federal Reserve’s new vice chairwoman said on Monday.
Janet Yellen has supported the Fed’s policy of ultra-low interest rates to bolster the economy and to help drive down unemployment.
Her remarks, which don’t change that stance, may be aimed at tempering critics. They worry she’ll want to hold rates at record low levels for too long, which could inflate new bubbles in the prices of commodities, bonds or other assets.
PHOTO: BLOOMBERG
Yellen, who was sworn in as the Fed’s second-highest official last week, made clear she is aware of the risks.
“It is conceivable that accomodative monetary policy could provide tinder for a buildup of leverage and excessive risk-taking,” Yellen said in remarks to economists meeting in Denver.
It was her first speech since becoming vice chairwoman.
The Fed at its meeting next month is expected to take new steps to energize the economy. It’s likely to announce a new program to buy government bonds. Doing so would lower rates on mortgages, corporate loans and other debt. The Fed hopes that would get people and companies to buy more, which would strengthen the economy.
The new effort is expected to be smaller than the US$1.7 trillion launched during the recession. Under that program, the Fed bought mostly mortgage securities and debt, although it did buy some government bonds, too.
The Fed has held its key interest rate at a record low near zero since December 2008. Because it can’t lower that rate any more, it has turned to other unconventional ways to pump up the economy.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is