Bernanke Tries to Signal Rebound, Conceal When Rates Will Go Up
By Alec Rivera
Published: November 4, 2009
Bloomberg reports that the Ben Bernanke and the Federal Reserve, after their policy meeting today closes, are expected to announce that the economy is growing, but it does not require an increase in rates at this time. They are also expected to announce that the $1 trillion injection they provided for the economy will be suspended.
While the economy is growing, rates will remain low because many believe that the economy is not yet self-sustaining after a nearly 50% drop during the latest economic recession. Key to the Fed raising rates in the future will be seeing an increase in the labor market.
“They’ve got, for a lot of reasons, to say that it looks like what we’ve been doing has been working,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey. “But if they’re too exuberant about it, it’s going to trigger expectations of a policy move quicker than perhaps they might like to do.”
Members of the Federal Open Market Committee may be concerned any hint of a change in policy would prompt investors to sell Treasury bonds, sending rates higher on consumer and business loans and endangering the recovery, analysts said. The FOMC resumed discussions this morning and a statement is due around 2:15 p.m.
The Fed is expected to maintain near-zero rates for an “extended period” of time.
Photo (via Bloomberg)
Tagged with: Ben Bernanke, Economy, Fed, Interest Rates, Rebound
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