■ Interest rates
Fed holds rate at 1.25%
Federal Reserve policymakers left their benchmark interest rate unchanged and said the economy still needs the lowest borrowing costs in four decades to sustain the recovery "through its current soft spot." Central bankers voted unanimously to leave the benchmark overnight bank lending rate at 1.25 percent, the lowest since July 1961. The Fed reduced the rate by a larger-than-expected half percentage point at its Nov. 6 meeting, a decision that Fed Governor Ben Bernanke later told an economics club was "insurance" against additional economic weakness. "They want to be aggressive," said Janet Yellin, a former Fed governor who is now a business professor at the University of California, Berkeley. The Fed would rather see "a recovery that is too strong rather than one that is too weak" and is likely to leave rates unchanged "for a good, long time."
■ Banking
Luxembourg wants secrecy
Luxembourg and Austria will try today to fend off pressure to tear down their banking-secrecy protections as part of a Europe-wide plan to combat tax evasion. The two are resisting a proposal for an EU bank-interest reporting requirement as long as Switzerland, not an EU member, clings to the depositor protections that have helped Swiss banks amass US$2.3 trillion in assets under management. "All the actors know that the proposed legislation is very costly and contains too many loopholes -- who could then possibly agree with it?" Charles Hermann, a partner in KPMG's Zurich office, said in an interview. The interest-reporting rule would replace a tax the UK blocked in 1999. The deadlock reflects increasing competition between financial centers in an era when investors can move capital across national borders at the touch of a button. Luxembourg, the EU's smallest state, has made finance the backbone of its economy by offering banking secrecy and no withholding taxes.
■ Trade
China happy with WTO
China's state media cheered the first anniversary of its hard-won WTO membership yesterday, saying it was boosting trade and investment while making the state-dominated economy more open and competitive. Newspapers hailed China as an exemplary WTO member and said trade this year is expected to hit record highs. The reports made only veiled references to Chinese worries that foreign competition could cost millions of jobs and didn't mention foreign complaints that Beijing has been slower than promised in opening its markets. "Against a gloomy global slowdown, China has make its first year of WTO membership a splendid success," said the newspaper China Daily. China became a member of the rule-making body for world trade on Dec. 11, 2001, in Doha, Qatar, capping the 15-year quest by the last major communist nations to embrace global capitalism. The China Daily noted that regulators now must publicize policy changes -- a big step for system that used to treat such data as secret, leading to complaints from both Chinese and foreign companies. The State Economic and Trade Commission, the nation's top trade regulator, has abolished or changed half of its regulations, cutting the number of items subject to official examination by one-third, China Daily said.
Agencies
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