Fed: Interest Rates Should Stay Low for 'Foreseeable' Future

Fed: Interest Rates Should Stay Low for 'Foreseeable' Future
Fed Chairman Ben Bernanke

Likely concerned about recent interest rate hikes, Federal Reserve Chairman Ben Bernanke Wednesday watered down his tapering talk in a Q&A session following a speech in Boston.
Bottom line: Even if the central bank begins pulling back its asset purchases by year’s end, it will still persist in providing a stimulus plan that will hold interest rates at low levels, while keeping an eye on the unemployment rate and inflation.
Apparently, the Fed policymakers wanted it to be known that the commencement of “tapering” does not mean higher interest rates.
The markets don’t necessarily agree. A big sell-off in U.S. Treasuries followed Bernanke’s news conference last month when he said tapering would likely be initiated late this year, and the Fed would bring an end to its $85 billion monthly bond and securities purchases sometime in 2014.
The average 30-year mortgage rate has surged to a two-year high in recent weeks, hovering close to 4.5 percent — although still in historically low territory.
Stocks and bonds reacted positively this time, making gains in after-hours after Bernanke’s remarks Wednesday.
“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Bernanke said Wednesday in response to a question.
Bernanke also said high unemployment requires that the Fed press on with its stimulus. He also said he expects inflation to “come back up” closer to the central bank’s 2 percent goal.
Earlier Wednesday, the Fed released minutes of the Federal Open Market Committee’s June 18-19 policy meeting. The minutes indicate that many officials want to see more signs of employment rebounding before beginning the tapering of its monthly purchases bonds and mortgage-backed securities.
The minutes also refer to managing interest rates as a strategy that is not tied to the end of the Fed’s asset purchases. There was no indication of an end to keeping the benchmark federal funds rate at near zero, where it has been since late 2008 — unless unemployment and inflation return to ideal levels for the policymakers.
“Many members indicated that decisions about the pace and composition of asset purchases were distinct from decisions about the appropriate level of the federal funds rate, which would continue to be guided by the thresholds (unemployment and inflation) in the Committee’s statement,” the minutes said. In general, members continued to anticipate that maintaining the current exceptionally low level of the federal funds rate was likely to remain appropriate for a considerable period after asset purchases are concluded.”

One thought on “Fed: Interest Rates Should Stay Low for 'Foreseeable' Future

  • July 13, 2013 at 9:54 pm

    This week, the chart of the S&P 500, $SPX, SPY, shows a 2.9% rise to close at 1.680, manifesting an Elliott Wave 2 Up, after having achieved a recent Elliott Wave 5 Up High as presented in Daneric’s post Elliott Wave Update ~ Thursday 11 July 2013, suggesting that it will be entering an Elliott Wave 3 Down; these are the most destructive of all economic waves, as they for all practical purposes wipe out all the wealth garnered on the previous five waves up.
    US Stocks, VTI, rose 2.9% to a new high; Germany, EWG, recovered 6.1%. Since May 1, 2013, it has been Peru, EPU, Chile, ECH, Turkey, TUR, Indonesia, IDX, Thailand, THD, and Brazil, EWZ, and the Emerging Market Mining, EMMT, leading the Emerging Markets, EEM, lower as is seen in their combine ongoing Yahoo Finance chart.
    In the yield bearing equity sectors, Utilities, XLU, recovered 4.7%. Of the yield bearing sectors, Mortgage REITS, REM, together with Emerging Market Financials, EMFN, remain sold off since the “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, on May 24, 2013, as is seen in their combined ongoing Yahoo Finance Chart
    Of note the Elliott Wave Surfer chart of the EUR/JPY shows an Elliott Wave Top on May 24, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, rose to 2.01%. This seen also in the Stockcharts.com chart of FXE:FXY. It was at this time that the leverage of carry trade investing collapsed, as is seen in the daily chart of the Optomized Carry Trade, ETN, ICI.
    The Interest Rate on the US 10 Year Note, $TNX, closed lower at 2.60%, enabling Aggregate Credit, AGG, to rise 0.92% this week.
    This week Commodities, DBC, rose 2.3%; the chart of West Texas Intermediate Crude, $WTIC, rose 2.5%, to close at 106.24; the chart of Spot Gold, $GOLD, rose 5.8%,to close at $1,285, as the US Dollar, $USD, traded 1.8% lower to close at $83.12.
    The power of this week’s rally is seen in the chart of World Stocks, VT, in relation to Aggregate Credit, AGG, that is VT:AGG, rallying to its highest ever value, suggests that Liberalism’s moral hazard based, Peak Stock Wealth, VT, was achieved the week ending July 12, 2013, as investors used margin credit to take stocks to their likely peak achievement, on the leverage of the world central banks’ monetary policies of investment choice, and schemes of credit expansion, such as quantitative easing. CBS reports Stocks hit new high after Bernanke speech buoys investors, where the Fed Chairman commented at a NBER event, “So you put that all together, and I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”
    In the age of Authoritarianism, and its policies of diktat and schemes of debt servitude, wealth can only be preserved by investing in and taking possession of gold bullion either in physical form or by trading on an Internet Platform such as Bold Is Money or Bullion Vault.

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