The Federal Reserve slashed its outlook for US economic growth next year on Tuesday and suggested that its members are unsure about future interest rate cuts in a report that left financial markets perplexed.
The central bank, in its first quarterly update under a new policy implemented by Federal Reserve Chairman Ben Bernanke, projected growth next year in a range of 1.8 percent to 2.5 percent down from 2.5 percent to 2.75 percent.
The forecast was revised from a semiannual report in July, under a new policy ordered by Bernanke to provide more frequent updates on the economic outlook.
The revisions "stemmed from a number of factors, including the tightened terms and reduced availability of subprime and jumbo mortgages, weaker-than-expected housing data, and rising oil prices," the Fed said.
Wall Street reacted negatively to the report, but later recovered.
"These very wide ranges startled the markets to some extent, and it is not clear how to interpret them from a forward-looking policy perspective, other than the reality that there is an unprecedented level of uncertainty about the outlook," said Brian Bethune, economist at Global Insight.
Bethune said despite the Fed's noncommital position, he expects the central bank to lower borrowing costs further after two reductions that brought the federal funds rate to 4.5 percent.
"The downside risks to the outlook far outweigh the upside risks," he said. "Thus the Fed's central tendency forecast does look a little rich to us at the current conjuncture, and for that reason we are forecasting that the Fed will reduce the federal funds rate by at least an additional 25 basis points by early 2008."
The Fed report projected core inflation expectation next year to 1.70 percent to 1.90 percent, down from 1.75 percent to 2 percent.
For the first time, the Fed made an estimate for headline inflation, which includes food and energy prices that are removed from the core number. The Fed sees headline inflation at 1.80 percent to 2.10 percent next year.
The Fed's specific expectations for GDP growth and inflation next year are new, but largely in line with its more general pronouncements earlier this year that growth next year would be slower than this year.
The report also included forecasts to 2010, showing sluggish growth rates over the next three years. It said 2009 growth would be in a range of 2.3 percent to 2.7 percent and pick up to between 2.5 percent to 2.6 percent in 2010.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary