US Federal Reserve Chairman Alan Greenspan and his colleagues are being buffeted by strong economic crosscurrents -- rising inflation pressures on the one hand and a sudden slowing in economic growth on the other.
Faced with conflicting forces, the Fed was still expected to stay the course, raising interest rates by a moderate quarter-point late yesterday, the eighth such increase since the central bank embarked on the current credit-tightening campaign last June.
"There is certainly not going to be any surprise in their action. Every indication is that the Fed will hike the federal funds target by another quarter-point," said David Jones, head of DMJ Advisers.
Such a move would push the target for the funds rate, the interest that banks charge each other on overnight loans, from the current 2.75 percent to 3 percent. When the Fed started boosting rates 10 months ago, the funds rate stood at 1 percent, the lowest level in 46 years.
The increase in the funds rate is expected to trigger a corresponding quarter-point increase in banks' prime lending rate, the benchmark for millions of business and consumer loans. The prime rate now stands at 5.5 percent.
Analysts believe that given the current economic uncertainty, the Fed will not only stick to another quarter-point rate increase but will also make few changes in the wording of the statement announcing the action.
The expectation is that the Fed will continue to pledge to make any further rate increases at a "measured" pace, which has come to mean further quarter-point moves.
The prediction is a far cry from the expectations about the Fed's next moves that were being made immediately after its last meeting on March 22.
At that time, Wall Street began bracing for the Fed to ditch the promise to be measured and jack up rates by a half-point. That fear of more aggressive Fed credit-tightening was fanned by a change of wording in the March Fed statement to acknowledge more worries about inflation.
Since then, however, various indicators showed the economy slowing sharply in March. The government reported last week that this sudden slowdown had dragged down economic growth to a rate of just 3.1 percent in the first three months of the year, the slowest pace in two years.
That slowdown has eased fears for the time being about the Fed becoming more aggressive in its rate hikes. Analysts, however, are not looking for a pause in the gradual quarter-point increases because inflation statistics are still flashing warning signals.
Consumer prices jumped 0.6 percent, reflecting the surge in energy costs, but even outside of volatile food and energy, the so-called core rate of inflation was up 0.4 percent in March, the biggest jump in two-and-a-half years.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from