Federal Reserve faces new limits on ability to halt economic slide

[marmar]

from the Int'l Herald-Tribune:



Federal Reserve faces new limits on ability to halt economic slide
By Edmund L. Andrews and Michael M. Grynbaum Published: February 21, 2008


WASHINGTON: The U.S. Federal Reserve Board, for all its power, faces tough new limits on its ability to keep the economy out of a recession.

Even though the Fed cut short-term interest rates twice in January, home mortgage rates have edged up steadily in the past few weeks and credit for businesses is as tight as it was when financial markets seized up last August.

On Wednesday, the central bank, led by Ben Bernanke, found itself facing signs of a problem the United States has not seen in decades: stagflation, the mix of slumping economic growth, sharp spikes in prices for oil and food and a rising pace of overall inflation.

The U.S. Labor Department reported that consumer prices had jumped 4.3 percent in January, compared with the level one year earlier. That was the biggest jump in more than two years. Even after excluding the volatile prices for food and energy, inflation was up 2.5 percent - well above the central bank's unofficial target of 1 percent to 2 percent.

A few hours after the report on consumer prices, Fed officials acknowledged that they had reduced their forecast for U.S. economic growth this year to an anemic pace of 1.3 percent to 2 percent and that joblessness was likely to climb to 5.3 percent from 4.9 percent today.

The Fed's outlook helped propel U.S. stock markets higher on the expectation that the central bank's more dismal outlook for the economy would lead to further interest rate cuts aimed at reviving growth. After being down earlier, the Dow Jones industrial average closed up 90 points, or 0.73 percent, at 12,427.26, while the Nasdaq composite index erased an earlier 0.6 percent loss to close up 0.9 percent.

The Fed's new forecast, however, assumes that growth will be all but stagnant for the first six months of this year before the economy gets a lift in the second half from the economic stimulus package that Congress recently passed and from the Fed's own decisions to lower interest rates sharply. ......(more)

The complete piece is at: http://www.iht.com/articles/2008/02/21/business/usecon.php

[Karenina]

1. Da Fed Reserve Board need to go the way of the DODO.

[indepat]

3. Along with all 'puke and DINOs who have masterminded an eight-fold increase

in the Federal debt in just over 25 years with the Gipper's voodoo economics/trickle down theory being continued by GHWB and Junior. The bad news is there won't be enough money to pay the babyboomers' social security benefits in a currency with a smidgen of purchasing power. The good news is that trillions of dollars of the payroll taxes the babyboomers paid/will have paid during their working careers now/will repose in the wealth of the most affluent through a highly regressive tax scheme (would be fraud in the business world) and these most affluent, who already owned/controlled maybe 90% of the nation's wealth before the Gipper's voodoo economics went into high gear now own even a much greater percentage of the nation's wealth whereas poverty is now much more widespread and the standard of living of a goodly portion of the people has gone down. Long live King George. :shrug:

[Mind_your_head]

2. Really? How interesting.....

"new limits on ability to halt economic slide"

Just who/what is setting the new limits? I thought the "Fed" (which is all privately owned, btw) owned/controlled it all! Where is this 'limitation' coming from anyway????

"Permit me to issue and control the money of a nation, and I care not who makes its laws." - M. A. Rothschild, banker