The US Federal Reserve took aim at slow growth and high joblessness on Thursday, announcing a new, open-ended US$40 billion per month bond-buying program as it slashed its growth forecast for this year.
The Fed said the new monetary easing effort would remain in place until it sees substantial improvement in the US jobs market, where 8.1 percent of Americans remain unemployed.
Doubling up on its message to banks, industry and consumers that holding their money unused would essentially cost them, the US central bank also pledged to keep its benchmark interest rate at ultra-low levels until at least the middle of 2015.
By then, it hopes, economic growth will have begun generating the jobs and spending levels necessary to be self-sustaining.
The news gave new life to US stocks on Thursday, with the S&P 500 closing up 1.63 percent, and the Dow 1.55 percent.
The news lifted the euro well past US$1.30, but Japanese authorities expressed concern that a flood of cheap dollars would further strengthen the yen, which hit a seven-month high against the greenback late on Thursday.
Asian markets surged yesterday, with Taipei climbing 2.1 percent to 7,738.05, Tokyo rising 1.83 percent to 9,159.39 and Seoul soaring 2.92 percent to 2,007.58.
Hong Kong rocketed 2.9 percent to 20,629.78, Shanghai added 1.09 percent to 2,123.85 and Sydney jumped 1.17 percent to 4,390.
In the face of weak growth and stagnant hiring, the Fed was to begin spending US$40 billion each month on mortgage-backed securities, its third “quantitative easing” (QE3) program in less than three years.
QE3 would take the Fed’s total monthly purchases, including ongoing programs, to US$85 billion a month, it said.
That “should increase the downward pressure on long-term interest rates more generally, but also on mortgage rates specifically, which should provide further support for the housing sector, encouraging home purchases and refinancing,” Fed Chairman Ben Bernanke said.
The effect should spill through to the broader economy, pushing up the prices of homes, stocks and other assets that the Fed hopes will make Americans feel more financially comfortable and begin spending.
If currently insecure and tight-fisted Americans are more willing to spend, Bernanke said: “That’s going to provide the demand most firms need to be able to hire or invest.”
The Federal Open Market Committee (FOMC), the Fed’s policy board, also said its monetary stimulus efforts will remain in place “for a considerable time after the economic recovery strengthens,” a promise it had not made before.
“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved,” it said.
“We’re just trying to get the economy moving in the right direction to make sure that we don’t stagnate at high levels unemployment,” Bernanke told reporters.
The unemployment situation remained a “grave concern,” he said, adding: “The weak job market should concern every American.”
The FOMC cut its forecast for growth this year to 1.7 to 2.0 percent, from the previous 1.9 to 2.4 percent range, though it predicted a pickup to 2.5 to 3.0 percent next year.
The jobless rate would still be in the 6.7 to 7.3 percent at the end of 2014, while inflation would remain at or below the Fed’s 2 percent target through 2015.
Jim O’Sullivan of High Frequency Economics said that while the Fed’s move will not have much immediate effect, it will act on the economy “like a time-release capsule, the effects of which increasingly kick in over time.”
“The Fed news reinforces our view that 2013 growth is likely to be stronger than widely expected, with momentum building as the year progresses,” he said.
However, other analysts were more doubtful, pointing to external risks to the economy from Europe and China and the political stalemate over fiscal policy, which Bernanke conceded he has no leverage over.
“Our view is that these actions will do little to stimulate growth, but will raise inflation expectations,” John Ryding and Conrad DeQuadros of RDQ Economics said.
Napoleon Osorio is proud of being the first taxi driver to have accepted payment in bitcoin in the first country in the world to make the cryptocurrency legal tender: El Salvador. He credits Salvadoran President Nayib Bukele’s decision to bank on bitcoin three years ago with changing his life. “Before I was unemployed... And now I have my own business,” said the 39-year-old businessman, who uses an app to charge for rides in bitcoin and now runs his own car rental company. Three years ago the leader of the Central American nation took a huge gamble when he put bitcoin
TECH RACE: The Chinese firm showed off its new Mate XT hours after the latest iPhone launch, but its price tag and limited supply could be drawbacks China’s Huawei Technologies Co (華為) yesterday unveiled the world’s first tri-foldable phone, as it seeks to expand its lead in the world’s biggest smartphone market and steal the spotlight from Apple Inc hours after it debuted a new iPhone. The Chinese tech giant showed off its new Mate XT, which users can fold three ways like an accordion screen door, during a launch ceremony in Shenzhen. The Mate XT comes in red and black and has a 10.2-inch display screen. At 3.6mm thick, it is the world’s slimmest foldable smartphone, Huawei said. The company’s Web site showed that it has garnered more than
PARTNERSHIPS: TSMC said it has been working with multiple memorychip makers for more than two years to provide a full spectrum of solutions to address AI demand Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it has been collaborating with multiple memorychip makers in high-bandwidth memory (HBM) used in artificial intelligence (AI) applications for more than two years, refuting South Korean media report's about an unprecedented partnership with Samsung Electronics Co. As Samsung is competing with TSMC for a bigger foundry business, any cooperation between the two technology heavyweights would catch the eyes of investors and experts in the semiconductor industry. “We have been working with memory partners, including Micron, Samsung Memory and SK Hynix, on HBM solutions for more than two years, aiming to advance 3D integrated circuit
Vanguard International Semiconductor Corp (世界先進) and Episil Technologies Inc (漢磊) yesterday announced plans to jointly build an 8-inch fab to produce silicon carbide (SiC) chips through an equity acquisition deal. SiC chips offer higher efficiency and lower energy loss than pure silicon chips, and they are able to operate at higher temperatures. They have become crucial to the development of electric vehicles, artificial intelligence data centers, green energy storage and industrial devices. Vanguard, a contract chipmaker focused on making power management chips and driver ICs for displays, is to acquire a 13 percent stake in Episil for NT$2.48 billion (US$77.1 million).
RSS