The US Federal Reserve is likely to move four-decades-low interest rates even lower this week in the face of rising concerns that the struggling economy is headed for rougher times.
A series of recent economic reports has offered indications that the country's sputtering recovery is once again threatening to stall, and that leads many private economists to predict a rate cut when Fed policy-makers meet Wednesday.
"The jury is now in, and the verdict is rate cut," said Sherry Cooper, an economist at BMO Financial Group.
Most economists believe the only question mark is whether the Fed will cut its target for the federal funds rate, the interest that banks charge each other, by one-quarter or one-half of a percentage point.
The funds rate has rested at 1.75 percent since Dec. 11. That's when the central bank made its 11th rate cut in an aggressive year-long campaign to bolster economic activity and restore growth. The Fed acted while the country was in the grips of its first recession in a decade and still suffering economic shocks from the Sept. 11, 2001, terrorist attacks.
Such low rates have allowed automakers to offer zero-interest financing deals that drew buyers into auto dealerships in record numbers through the summer. They also have produced the lowest mortgage rates since the mid-1960s, spurring sales of new and existing homes to record levels.
The strength in these two critical areas, however, has been insufficient to launch a sustained economic recovery. Jolts such as the corporate accounting scandals, rising oil prices and worries about possible war with Iraq have acted as strong headwinds.
The economy did rebound from lackluster growth at a 1.3 percent rate in the spring to 3.1 percent in the summer. But many forecasters believe growth will slump again in the current quarter.
The most pessimistic look for an anemic rate of 1 percent or less as the surge in consumer spending fades, especially for big-ticket items such as cars.
"We are clearly hitting a soft spot with consumers worried about everything in the world from a war in Iraq to another terrorist attack," said David Wyss, chief economist at Standard & Poor's in New York.
The government reported Friday that the jobless rate climbed to 5.7 percent in October; the number of people looking for work but unable to find one rose by 100,000 to 8.2 million. Manufacturing lost an additional 49,000 jobs, the 27th consecutive monthly decline, bringing job losses in this sector to almost 2 million.
Jerry Jasinowski, president of the National Association of Manufacturers, said the weakening economy requires a bold move from the Fed. He interprets that as a rate cut of one-half percentage point at its policy-setting Federal Open Market Committee meeting Wednesday.
"There is a great deal of uncertainty right now, and policy makers need to take the steps to encourage business lending to get this expansion back on track," he said.
While the Fed favored half-point moves in eight of its 11 cuts last year, many analysts believe it may opt for a quarter-point now, in part because rates already are so low that Fed policy-makers could be worried about running out of maneuvering room.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
‘FORM OF PROTEST’: The German Institute Taipei said it was ‘shocked’ to see Nazi symbolism used in connection with political aims as it condemned the incident Sung Chien-liang (宋建樑), who led efforts to recall Democratic Progressive Party (DPP) Legislator Lee Kun-cheng (李坤城), was released on bail of NT$80,000 yesterday amid an outcry over a Nazi armband he wore to questioning the night before. Sung arrived at the New Taipei City District Prosecutors’ Office for questioning in a recall petition forgery case on Tuesday night wearing a red armband bearing a swastika, carrying a copy of Adolf Hitler’s Mein Kampf and giving a Nazi salute. Sung left the building at 1:15am without the armband and apparently covering the book with a coat. This is a serious international scandal and Chinese
COUNTERINTELLIGENCE TRAINING: The ministry said 87.5 percent of the apprehended Chinese agents were reported by service members they tried to lure into becoming spies Taiwanese organized crime, illegal money lenders, temples and civic groups are complicit in Beijing’s infiltration of the armed forces, the Ministry of National Defense (MND) said in a report yesterday. Retired service members who had been turned to Beijing’s cause mainly relied on those channels to infiltrate the Taiwanese military, according to the report to be submitted to lawmakers ahead of tomorrow’s hearing on Chinese espionage in the military. Chinese intelligence typically used blackmail, Internet-based communications, bribery or debts to loan sharks to leverage active service personnel to do its bidding, it said. China’s main goals are to collect intelligence, and develop a
RSS