The US Federal Reserve confirmed its commitment on Wednesday to the six-week-old QE3 stimulus, saying that the US economy still needed the support of its easy money programs.
In its last meeting before the US presidential election — which, if challenger Mitt Romney wins, could trigger an economic policy shift — the Fed’s rate-setting board chose to make no changes to its monetary stance.
Brushing off some recent signs of stronger expansion, the Federal Open Market Committee (FOMC) said economic growth remained at a “moderate” pace.
It noted a rise in household spending and an improving housing industry, but said growth in business investment had slowed, and that joblessness was still high.
The Fed “remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,” the FOMC said in a statement after a two-day meeting.
The economy also remains vulnerable to strains in global financial markets, it added.
The FOMC kept its benchmark interest rate locked at between 0 percent and 0.25 percent as expected, and said it expected to keep the rate at a very low level “at least through mid-2015.”
As expected, the Fed said its broad policy to press down interest rates would stay in place “for a considerable time after the economic recovery strengthens.”
The US central bank was referring to its two stimulus programs, QE3 launched last month and the nearly year-old “Operation Twist,” through which it invests US$85 billion each month in bond purchases in an effort to drive down long-term interest rates to simulate investment and hiring.
If the country’s high unemployment situation does not improve “substantially,” the FOMC said it will continue the existing program, add other asset purchase operations and employ other monetary tools to boost the economy.
The FOMC statement made no mention of its ongoing discussion, revealed in the minutes of the early September meeting, over whether it should tie its eventual raising of interest rates to an explicit target level for unemployment.
The meeting came before voters go to the polls on Nov. 6 to choose between President Barack Obama and Mitt Romney as the US leader for the next four years.
Obama has been a supporter of Fed Chariman Ben Bernanke, but Romney has been strongly critical of the “easy money” policies and said he would replace Bernanke if he wins.
However, Bernanke’s term does not expire until 2014, and it is unlikely that a newly elected Romney would seek to force him out earlier.
“After the big changes in September, and the presidential election less than two weeks away, officials were probably happy to make this week’s meeting as much of a non-event for markets as possible,” Jim O’Sullivan of High Frequency Economics said.
“More interesting will be the next FOMC meeting on December 11 and 12. Officials will likely make a decision then on whether QE3 will be extended to include Treasuries purchases when ‘Operation Twist’ ends at year-end. We expect it will be,” he said.
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