The No. 2 official of the US Federal Reserve said economic growth would end “noticeably stronger” in the second half of this year, but added that the US central bank still needed to keep its policy options open to provide more support to the economy if necessary.
Federal Reserve Vice Chairman Janet Yellen said in a speech in Colorado on Friday that oil and other commodity prices were falling and supply disruptions caused by Japan’s natural disasters were easing. Still, she said, the economy faces numerous problems.
Yellen said the central bank might need to consider more bond purchases to lower interest rates, but she said such an effort should be considered only if the economy should require “significantly greater” help than the Fed was now providing.
“It looks likely that economic growth in the second half of this year will be noticeably stronger, and inflation more moderate, than in the first half,” Yellen said in remarks to the annual meeting of the Financial Management Association International.
However, she said the Fed would keep under review a range of options that it could employ if needed to support growth, including further bond purchases.
“Securities purchases across a wide spectrum of maturities might become appropriate if evolving economic conditions called for significantly greater monetary accommodation,” Yellen said.
NO SPECIFICS
She said that at the Fed’s last meeting on Sept. 20 and Sept. 21 the central bank agreed to shift US$400 billion of its holdings into more long-term holdings of Treasury securities as a way of lowering long-term interest rates.
Yellen did not provide any specifics about what further types of securities the Fed might consider buying, but she said that expanding the size of the Fed’s holdings of long-term Treasury debt by too great an amount could adversely affect how this market operates.
On Thursday, Daniel Tarullo, another Fed board member, called for the central bank to consider buying more mortgage bonds as a way to spur growth by lowering mortgage interest rates and thus giving a boost to the depressed housing industry.
Tarullo and Yellen are among the 10 Fed officials who have a vote on the Federal Open Market Committee, the panel of Fed board members and regional bank presidents who meet eight times a year to set interest-rate policies.
Tarullo’s remarks came after Eric Rosengren, president of the Federal Reserve Bank of Boston, also endorsed in an interview this week the idea of considering further purchases of mortgage-backed securities.
The next meeting of the Federal Open Market Committee is scheduled for Nov. 1 and Nov. 2.
There has been speculation in financial markets that the Fed might go further in its campaign to jump-start an economy that many have feared is in danger of slipping back into a recession, although such a move would likely meet opposition from Fed officials who believe the central bank has done as much as it can do.
INTEREST RATES
In addition to last month’s move to rebalance its holdings, the Fed in August expanded its policy guidance to say it was prepared to keep interest rates at record lows until at least mid-2013 as long as inflation remained under control.
Both August’s and last month’s Fed actions were approved on 7-3 votes.
The three dissenting votes from regional banks presidents represented the largest number in nearly two decades and underscored the deep policy split on the board.
In her comments on Friday, Yellen said that she felt the central bank should explore providing more guidance for future moves including an idea being pushed by Charles Evans, head of the Chicago Federal Reserve Bank.
Evans has suggested that the Fed should consider pledging to keep rates at record lows until unemployment, currently at 9.1 percent, falls below 7.5 percent.
Yellen said such an idea should be explored, but she said it had drawbacks in that it could lead to confusion in the minds of the public over the Fed’s long-term goals for the economy.
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