Millions of out-of-work Americans, a bumpy stock market and economic uncertainties are motivation enough for the Federal Reserve to keep short-term interest rates at 41-year lows for a while, economists say.
Leaving borrowing costs low might motivate consumers, the economy's lifeblood, to keep spending and might encourage businesses to increase investment. That would provide a helping hand to an economy that analysts believe will grow tepidly this quarter and in the first quarter of 2003 but will not slide into a new recession.
"The Fed is expected to be sidelined until at least March given the uncertainties and the fragility of the current economic climate," said Richard Yamarone, economist with Argus Research Corp.
Knocked down by last year's recession, the economy has experienced an uneven recovery this year. The seesawing economic growth -- a below-par 1.3 percent pace in the second quarter, rising to a brisk 4 percent rate in the third quarter -- troubles the Bush administration, Fed policy-makers, Wall Street and Main Street.
"The economy is like a car trying to navigate a winter highway. It is moving but at a very sluggish pace and there have been stretches where conditions are quite slow and treacherous," said Lynn Reaser, chief economist at Banc of America Capital Management. "The general view, however, is that road conditions are going to improve in the spring, but until then a weather alert will remain in effect."
The manufacturing sector's comeback trail has hit a pothole. But consumers have been keeping their pocketbooks and wallets sufficiently open to prevent the recovery from fizzling. And low-mortgage rates are expected to power home sales to new records this year.
New claims for jobless benefits recently hit a 21-month low, suggesting layoffs are slowing. Yet the nation's unemployment rate jumped to 6 percent in November matching April's figure, which was the highest rate in eight years. The number of unemployed people rose to 8.5 million in November, up from 8.2 million the previous month.
The higher unemployment rate is fresh evidence that companies, worried about a possible war with Iraq, the stock market and battered profits, are reluctant to make big commitments in hiring and capital investment, thus restraining the recovery.
Against this backdrop, many economists believe Fed Chairman Alan Greenspan and his Federal Open Market Committee colleagues will hold a key interest rate -- the federal funds rate -- steady at 1.25 percent when they meet Tuesday, their last meeting of the year. An afternoon announcement was expected.
The funds rate is the interest that banks charge each other on overnight loans and is the Fed's main lever for influencing the economy.
"I think there will be a 1.25 percent funds rate for as far as my forecasting eye can see," said Stuart Hoffman, chief economist at PNC Financial Services Group.
The Fed's first rate cut this year and the 12th since January 2001 came at the central bank's previous meeting, Nov. 6. That bold, half-point reduction pushed the funds rate down to 1.25 percent.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS