Fed Retains $600 Billion Bond-Buying Plan to Boost Economy

Federal Reserve maintains its plan to expand the monetary stimulus registration, saying that economic growth has not been strong enough to reduce unemployment.

The Fed has 600 billion U.S. dollars in purchases of Treasury are aimed at promoting a recovery that has been "disappointingly slow" and keep prices stable "over time", said the Federal Open Market Committee in a statement today in Washington. The central bank reiterated its pledge to leave interest rates low for a "prolonged period".

Chairman Ben S. Bernanke, is resisting the top Republican lawmakers critical for the survival of unconventional efforts to reduce persistent unemployment rate near a maximum of 26 years. Gains in manufacturing, retail sales and inflation expectations indicate purchases of assets may be helpful. The strengthening dollar has defied the skeptics who said the policy would weaken the currency.

Stocks held gains and Treasury bonds declined after 10 years of instruction. 500 of Standard & Poor's rose 0.2 percent to 1,243.34 at 2:48 pm in New York. The yield on the benchmark 10-year Treasury rose to 3.45 percent from 3.28 percent late yesterday.

Recovery "continues, albeit at a pace that has been insufficient to reduce unemployment," said the statement from the Fed "The household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth and the credit crunch. "

Target Rate

Fed officials left their target for the federal funds rate, which covers interbank loans overnight, in a range from zero to 0.25 percent, marking two years of the policy. The central bank is likely to wait until the first quarter of 2012 to increase the rate, based on the median estimate of 8.2 in December poll of economists by us.

"The unemployment rate is high, and measures of core inflation are relatively low, compared to the levels that the Committee of judges to be consistent in the long term, with its dual mandate," the Fed said, repeating the language the statement last month.

Republican lawmakers, including Indiana Rep. Mike Pence, wants to get rid of half the Fed's legislative mandate that focuses on the maximum use to focus on price stability alone.

"The core inflation measures have followed the downward trend," said the statement.

Hoenig dissent

Kansas City, Thomas Hoenig, president of the Fed, the head of the longest-serving policy, voted against the decision of the FOMC for the eighth straight time and reiterated its view that "continued high level of monetary flexibility "may" destabilize the economy. " He tied the record of former Governor Henry Wallich in 1980 for most in a year dissents.

The $ 600 billion of purchases are in addition to the Treasury's long-term the Fed is buying for reinvestment of maturity of the mortgage debt, a policy that began in August. June combined purchase of a total of $ 850,000,000,000 to $ 900 million, or $ 110 billion per month, the Fed said Nov. 3. Policymakers reiterated that he will "regularly review, the purchase program and adjust as necessary.

The central bank has bought 114.1 billion U.S. dollars of Treasury bonds since November 12 when he began to purchases under the program called Queen Elizabeth 2 for the second round of so-called quantitative easing. The Fed bought $ 1,700,000,000,000 debt and mortgage bonds in the first round until March 2010.

Thirty-eight of 39 analysts surveyed by us taken Dec. 7 to 8 forecast the Fed would buy bonds program unchanged. Eight of 37 said the Fed ultimately buy more than $ 600 million expected until June, and two said they would buy less.

Signs of strength

Signs of economic strength, combined with the prospects for additional fiscal stimulus, has pushed Treasuries lower, with the 10-year yield rising to 3.28 percent yesterday from 2.57 percent on 3 November the day of action. 500 of Standard & Poor's has increased by 3.6 percent through yesterday, while the dollar has risen 3.8 percent against a basket of six currencies.

Inflation expectations for the next five years, as measured by the rate of equilibrium between nominal bonds and inflation index, rose to 1.58 percent yesterday from 1.47 percent on Nov. 3.

Some data suggest the U.S. recovery gaining strength in the sixth quarter after the end of the worst recession in seven decades. The U.S. retail sales last month rose more than expected, a government report showed today. Manufacturing expanded for a month running in November sixteenth, and a measure of consumer confidence rose in December to a maximum of six months.

'Delete' recovery

The global economy is in a "clear" that the recovery is to promote confidence in the transportation industry, Richard Giromini, executive director of truck manufacturer Wabash National Corp., said yesterday in an interview on Television "InBusiness With Margaret Brennan. "

At the same time, employment remains stagnant. Payrolls expanded by 39,000 jobs in November and the unemployment rate rose to 9.8 percent from 9.6 percent, compared with analysts' median forecasts for an addition of 150,000 and no change in unemployment rate has remained at 9.4 percent or higher since May 2009.

In 2008, the people "have called you crazy" if you said that U.S. interest rates would be zero for two years, said Paul Dales, economist at U.S. Capital Economics Ltd. in Toronto. Now, "is not too difficult to do so for another two years."

Core prices

Inflation excluding food and fuel costs, as measured by the consumer price index for personal expenses, decreased to 0.9 percent in October, the slowest pace since records began in 1960. Central banks prefer a long-term rate of 1.6 percent to 2 percent for core PCE indicator call.

"Given the current economic environment, most restaurant companies, including ours, have been reluctant to take the kind of price increases would be needed to offset the commodity inflation that has occurred this year," Andrew Puzder, chief executive of CKE Restaurants Inc.., operator of Carl's Jr. and Hardee's burger chain's, said in a conference call on December 8. CKE, based in Carpinteria, California, was purchased in July by an affiliate of Apollo Management LP.

Bernanke, who turned 57 yesterday, said in a Nov. 19 speech that there are limits to what the Fed can do alone and called for "a fiscal program that combines short-term measures to increase growth induce strong confidence measures to reduce structural deficits in the longer term "as a complement to central bank actions.

Transaction Tax

The Fed chief may get the first part. Congress this week is the vote of an estimated 858 billion U.S. dollars compromise tax package that temporarily maintain the Bush tax cuts-was for all Americans. This can reduce the chances of the Federal Reserve increasing Treasury purchases over $ 600 million dollars, Michael Feroli, chief U.S. economist JPMorgan Chase & Co., said last week.

Pacific Investment Management Co., which manages the largest bond fund, raised its forecast for growth next year in response to stimulation, Director General, Mohamed El-Erian said last week. Now sees the economy growing 3 percent to 3.5 percent in the fourth quarter of next year over the same period this year, up from 2 percent to 2.5 percent growth, El-Erian he said.

This is in line with forecasts average policy makers from the Fed last month. Central banks see an unemployment rate of 8.9 percent to 9.1 percent in the fourth quarter of 2011.

Republican Letter

purchases by the Fed will do more harm than good to the U.S. economy, John Boehner, R-Ohio, nominated to be chairman of the House, and three other top Republicans in the House and Senate, said in a letter November 17 Bernanke.

Bernanke said sitting for an interview with CBS Corp. s' "60 Minutes" program that aired on 05 December, the first TV sit-down with a news organization since July 2009.

"We're not far from the level at which the economy is not self-sustainable," said Bernanke. It is possible that the Fed could expand the purchase of bonds beyond $ 600 billion, he said.

The tension sets the stage for next year's clashes between Bernanke and congressional Republicans, who gained control of the House and most Democrats reduced "the Senate in the November elections.

Representative Ron Paul of Texas, author of "End the Fed" chair a House subcommittee central bank supervision. The House Oversight Committee will be headed by California Republican Darrell Issa, who is the target of increasing the transparency of the Fed, such as shortening the period of five years in the release of transcripts of FOMC meetings.

"The cost of the independence of the Fed, at some point have to be a scapegoat," said Vincent Reinhart, former director of monetary affairs of the Fed who is now a resident scholar at the American Enterprise Institute in Washington.