Three voting members of the US Federal Reserve’s policy committee signaled on Wednesday that they would support more stimulus if the economy weakens.
Janet Yellen, vice chairperson of the Fed, Dennis Lockhart, president of the Fed’s Atlanta regional bank, and John Williams, president of the Fed’s San Francisco regional bank, all said in speeches that they would back more stimulus if conditions worsened.
Yellen, an ally of Fed Chairman Ben Bernanke, said the Fed could pursue more bond buying to lower long-term rates and encourage borrowing and lending, or it could extend its plan to keep short-term rates near zero beyond late 2014.
However, she acknowledged both options would have a limited effect on the economy.
Even so, Yellen said that keeping a more accommodative money policy in place for an extended period of time was needed to keep the economy on the path to recovery.
In remarks prepared for delivery at a Federal Reserve Bank of Boston dinner, she said that despite some modest improvement of late, the weak housing sector remains one of several factors weighing down the economic recovery and keeping the nation’s unemployment rate elevated.
“Given these headwinds, I believe that a highly accommodative monetary policy will be needed for quite some time to help the economy mend,” Yellen said.
Lockhart voiced a similar observation at a speech earlier in Florida. He said dismal job growth in April and last month highlighted the problems facing the “halting and tenuous” recovery. If conditions deteriorate, “further monetary actions to support the recovery will certainly need to be considered,” he added.
Lockhart did not specify what measures should be weighed, but many investors hope the Fed will continue buying bonds in an effort to drive down long-term rates.
Speaking to Seattle-area community leaders in Bellevue, Washington, Williams spelled out ways the Fed could help counter a worsening economic and unemployment outlook, or a scenario where inflation falls significantly.
“In such circumstances, an effective tool would be further purchases of longer-maturity securities, potentially including agency mortgage-backed securities,” he said. “Past purchases have succeeded in lowering borrowing costs and improving financial conditions, thereby supporting economic recovery.”
Bernanke was to testify yesterday on Capitol Hill and could provide further guidance on Fed policymaking.
The Fed has done two rounds of bond purchases to try to lower long-term interest rates and encourage borrowing and spending. After those purchases ended, the Fed began a program dubbed Operation Twist: It sells shorter-term securities and buys longer-term bonds to keep their rates down. Operation Twist is set to expire at the end of this month.
Bernanke has said that more bond purchases, or other steps by the Fed, are still an option if the economy weakens. However, many analysts don’t expect further moves at the Fed’s next policy meeting on June 19 and 20, saying long-term rates have already touched record lows.
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
United Microelectronics Corp (UMC, 聯電) expects its addressable market to grow by a low single-digit percentage this year, lower than the overall foundry industry’s 15 percent expansion and the global semiconductor industry’s 10 percent growth, the contract chipmaker said yesterday after reporting the worst profit in four-and-a-half years in the fourth quarter of last year. Growth would be fueled by demand for artificial intelligence (AI) servers, a moderate recovery in consumer electronics and an increase in semiconductor content, UMC said. “UMC’s goal is to outgrow our addressable market while maintaining our structural profitability,” UMC copresident Jason Wang (王石) told an online earnings
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said