The US Federal Reserve on Wednesday left its monetary policy unchanged, as it slashed US economic growth estimates, saying the slowdown was in part due to factors that were “likely” to be temporary.
The Federal Open Market Committee (FOMC) unanimously decided to hold its near-zero interest rate, end a US$600 billion bond-buying program by Thursday next week and continue to reinvest its principal payments from security holdings.
“The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee expected,” the policy-setting FOMC said in a statement after a two-day meeting.
The slowdown “in part” was due to “factors that are likely to be temporary,” such as higher food and energy prices which were crimping consumer purchasing power and supply chain disruptions related to Japan’s March earthquake and tsunami disaster, the committee said.
The Fed slashed its GDP growth estimate for this year to a range of 2.7 percent to 2.9 percent, from its April projection of 3.1 percent to 3.3 percent.
It also lowered its forecast for next year to 3.3 percent to 3.7 percent, from its April forecast of 3.5 percent to 4.2 percent.
Asian shares mostly edged down yesterday as traders cashed in after a two-day regional rally, while sentiment was also dampened by the Fed’s decision to cut its US growth forecast.
Tokyo lost 0.34 percent, or 32.69 points, to end at 9,596.74. Seoul closed 0.39 percent, or 8.04 points, lower at 2,055.86.
Sydney fell 0.71 percent, or 32.1 points, to 4,500.5, and Taipei dropped 0.62 percent, or 53.76 points, to 8,567.28.
However, Hong Kong was flat and Shanghai gained 0.26 percent in afternoon trade.
US Federal Reserve Chairman Ben Bernanke said the key reasons for keeping monetary policy loose were “the ongoing labor market slack” and “the subdued inflation outlook.”
The Fed has additional “untested” tools available to ease monetary policy further if conditions worsen, including increasing securities purchases or giving a fixed date for the next rate hike, but “none of them are without risks or costs,” Bernanke said at a post-FOMC news conference.
The central bank held its target federal funds rate between zero and 0.25 percent, where it has been since December 2008, in an effort to stimulate growth after a financial sector meltdown.
For the 22nd consecutive meeting, Fed policymakers said it would likely remain exceptionally low “for an extended period.”
The Fed expressed concern about rising unemployment, which hit a rate of 9.1 percent last month.
“We expect the unemployment rate to continue to decline, but the pace of progress remains frustratingly slow,” Bernanke said.
The Fed’s latest economic projections indicated little relief was on the way in the jobs market. This year’s unemployment rate was now estimated between 8.6 percent and 8.9 percent, up 0.2 point from the April estimate.
The central bank maintained a benign view on a recent pickup in inflation, saying longer-term inflation expectations had remained stable.
However, Bernanke stressed the difficulty of making accurate forecasts and acknowledged the economy is facing more long-lasting challenges to recovery.
“Maybe some of the headwinds that have been concerning us, like ... weakness in the financial sector, problems in the housing sector, balance sheets and deleveraging issues, some of these headwinds may be stronger or more persistent than we thought,” he said.
Bernanke also warned of potential risks to the global economy from Greece’s sovereign debt crisis.
“If there were a failure to resolve that situation, it would pose threats to the European financial systems, the global financial system and to European political unity,” he said.
The Fed said it would complete its plan to end its US$600 billion second round of bond buying, or quantitative easing on Thursday next week.
It also maintained its policy of reinvesting principal payments from its securities holdings to keep cash pouring into the economy.
NO VIRUS BLUES: A SEMI Taiwan official said that the virus does not slow down the global semiconductor industry’s investment in manufacturing equipment The production value of the nation’s semiconductor industry is expected to grow 16.7 percent this year from last year, outpacing the global industry’s 3.3 percent growth, industry association SEMI said yesterday. That would help Taiwan safeguard its second spot in the global semiconductor market with a production value of more than NT$3 trillion (US$102.73 billion), SEMI Taiwan president Terry Tsao (曹世綸) told a media briefing in Taipei for the Semicon Taiwan trade show beginning today. The global semiconductor industry’s production value is expected to increase to US$426 billion this year, SEMI said. In terms of semiconductor equipment investment, equipment billings from Taiwanese firms
Intel Corp has received licenses from US authorities to continue supplying certain products to Huawei Technologies Co (華為), a company spokesman said yesterday. Washington has been pushing governments around to world to squeeze out Huawei, saying that the telecom giant would hand data to Beijing for espionage. From Monday last week, new curbs have barred US companies from supplying or servicing Huawei. This week, the state-backed China Securities Journal reported that Intel had received permission to supply Huawei. China’s Semiconductor Manufacturing International Corp (SMIC, 中芯國際), which uses US-origin equipment to make chips for Huawei and other companies, last week confirmed that it had sought
INVEST IN TAIWAN: A metal components casting firm and the world’s largest maker of aluminum bicycle rims also obtained approvals to join the program Solar Applied Materials Technology Co (SOLAR, 光洋應用材料), a part of Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) “green supply chain,” has pledged to invest NT$1 billion (US$34.1 million) to build a new plant at the Tainan Technology Industrial Park (台南科技工業區), the Ministry of Economic Affairs said yesterday. SOLAR has been collaborating with TSMC to extract precious metals from waste and reuse them as “sputtering target” material in high-end semiconductor manufacturing, a TSMC press release issued in May said. Established in 1978, SOLAR also offers key materials and integrated services to customers in the optoelectronics, information and communications technology, petrochemicals and consumer electronics industries,
‘SWARM TECH’: Joint venture FARobot is to develop autonomous mobile robots that would first be deployed in Hon Hai’s factories to optimize production efficiency Hon Hai Precision Industry Co (鴻海精密) and Adlink Technology Inc (凌華科技) have formed a robotic venture that aims to use “swarm technology” to create robots that can communicate with one another on the factory floor to optimize production efficiency. Hon Hai is Apple Inc’s leading iPhone assembler and the world’s largest contract electronics maker, while Adlink supplies industrial computers and Internet of Things solutions. Through a subsidiary, Hyield Venture Capital Co (鴻揚創投), Hon Hai holds a 51 percent stake in autonomous mobile robot (AMR) developer FARobot (法博智能移動), while Adlink owns the remaining 49 percent. Together, the two companies put up NT$200