While Wall Street has been on a wild roller-coaster ride and housing troubles continue to mount, the Federal Reserve still seems to be most concerned about inflation.
For that reason, most economists believed Fed Chairman Ben Bernanke and his colleagues would keep interest rates unchanged for a ninth consecutive time after their meeting yesterday.
That would mean that the federal funds rate would remain at 5.25 percent, where it has been for more than a year. It would also mean that the prime lending rate, the benchmark for millions of consumer and business loans, would remain unchanged at 8.25 percent.
Both rates have remained at that level since June last year when the Fed raised the funds rate for a record-setting 17th consecutive time, capping a two-year campaign to push rates high enough to slow the economy and keep inflation under control.
While there was widespread belief that the central bank would not adjust interest rates, there was plenty of debate among economists over how the Fed would acknowledge the recent market turmoil, reflecting spreading worries about credit quality, especially in such areas as subprime mortgages, or loans offered to borrowers with weak credit histories.
Some analysts believed the Fed would acknowledge the market's worries and stress that if the credit problems became serious enough, it stands ready to supply extra cash to the banking system.
"I think they will comment on the lending crisis," said David Jones, chief economist at DMJ Advisers. "They need to say that the Fed is prepared to deal with any liquidity difficulties in the credit market."
While the Fed serves as the industry's lender of last resort, providing money to financial institutions when other sources of credit are difficult to obtain, other analysts said they were not sure the Fed would have much to say about current credit problems.
"It might make investors nervous if all of a sudden the Fed is elevating the importance of what is going on in financial markets," said Mark Zandi, chief economist at Moody's Economy.com. "The Fed has argued for some time that risks were improperly priced. To bail investors out at the first sign of losses would be a mistake that would just engender more risk-taking in the future."
Other analysts said the central bank would say little about credit troubles because it was unclear how much impact they would have on the overall economy.
"The fewer words the better," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "They don't want to signal anything yet because things are up in the air."
At the moment, the economy is sending mixed signals. Overall economic growth, after slowing to an annual rate of 0.6 percent in the first quarter, rebounded to 3.4 percent in the second quarter.
COMBINING FORCES: The 66th Marine Brigade would support the 202nd Military Police Command in its defense of Taipei against ‘decapitation strikes,’ a source said The Marine Corps has deployed more than 100 soldiers and officers of the 66th Marine Brigade to Taipei International Airport (Songshan airport) as part of an effort to bolster defenses around the capital, a source with knowledge of the matter said yesterday. Two weeks ago, a military source said that the Ministry of National Defense ordered the Marine Corps to increase soldier deployments in the Taipei area. The 66th Marine Brigade has been tasked with protecting key areas in Taipei, with the 202nd Military Police Command also continuing to defend the capital. That came after a 2017 decision by the ministry to station
ALL-IN-ONE: A company in Tainan and another in New Taipei City offer tours to China during which Taiwanese can apply for a Chinese ID card, the source said The National Immigration Agency and national security authorities have identified at least five companies that help Taiwanese apply for Chinese identification cards while traveling in China, a source said yesterday. The issue has garnered attention in the past few months after YouTuber “Pa Chiung” (八炯) said that there are companies in Taiwan that help Taiwanese apply for Chinese documents. Minister of the Interior Liu Shyh-fang (劉世芳) last week said that three to five public relations firms in southern and northern Taiwan have allegedly assisted Taiwanese in applying for Chinese ID cards and were under investigation for potential contraventions of the Act Governing
‘INVESTMENT’: Rubio and Arevalo said they discussed the value of democracy, and Rubio thanked the president for Guatemala’s strong diplomatic relationship with Taiwan Guatemalan President Bernardo Arevalo met with US Secretary of State Marco Rubio in Guatemala City on Wednesday where they signed a deal for Guatemala to accept migrants deported from the US, while Rubio commended Guatemala for its support for Taiwan and said the US would do all it can to facilitate greater Taiwanese investment in Guatemala. Under the migrant agreement announced by Arevalo, the deportees would be returned to their home countries at US expense. It is the second deportation deal that Rubio has reached during a Central America trip that has been focused mainly on immigration. Arevalo said his
‘SOVEREIGN AI’: As of Nov. 19 last year, Taiwan was globally ranked No. 11 for having computing power of 103 petaflops. The governments wants to achieve 1,200 by 2029 The government would intensify efforts to bolster its “Sovereign Artificial Intelligence [AI]” program by setting a goal of elevating the nation’s collective computing power in the public and private sectors to 1,200 peta floating points per second (petaflops) by 2029, the Executive Yuan said yesterday. The goal was set to fulfill President William Lai’s (賴清德) vision of turning Taiwan into an “AI island.” Sovereign AI refers to a nation’s capabilities to produce AI using its own infrastructure, data, workforce and business networks. One petaflop allows 1 trillion calculations per second. As of Nov. 19 last year, Taiwan was globally ranked No. 11 for
RSS