Bernanke gets OK to lead Federal Reserve

[jlmadyson]

Text

WASHINGTON (AP) - The Senate on Tuesday approved the nomination of Ben Bernanke to be the next chairman of the Federal Reserve, the most influential economic policy job in the world. Bernanke, 52, was cleared on a voice vote after a short debate in the chamber amid strong bipartisan support. He succeeds Alan Greenspan, 79, who retires Tuesday after 18 1/2 years, making him the second-longest serving chairman at the central bank.

Not seeing any significant difference here between Bernake and Greenspan. The Fed today continued with their 14th consecutive quarter point fed hike. I'm not sure Bernake's fed targeting initiative is distinctly different than what Greenspan has been doing overall.

Some of the major things that the market as well as Bernake faces at the helm in imo are:

High Energy=undermining the economy any way you want to look at it.

Fed rate=need to halt sometime the market overall will not survive on a never ending continuation of rates.

GDP= where is it going from the lackluster quarter we just witnessed.

Inflation=is inflation in line or is there a certain continued increase in the near term.

Real Income=why hasn't there been any significant increase.

Savings Rate=another big problem any way you want to look at it.

 

[Genx87]

I am surprised they raised it again after the 4th qtr. They must have seen something on the internals that indicates it wont be a recurring theme.

 

[Engineer]

Originally posted by: Genx87
I am surprised they raised it again after the 4th qtr. They must have seen something on the internals that indicates it wont be a recurring theme.

Consumer confidence came in at a three year high today despite higher energy price. Couple that, low unemployment, high spending (sometimes beyond means indicating negative savings rate), higher expected business investment and you could have the recipe for continued inflationary pressures.

Energy prices are still, IMO, the big inflationary ticket item left though.

 

[dullard]

Originally posted by: Genx87
I am surprised they raised it again after the 4th qtr. They must have seen something on the internals that indicates it wont be a recurring theme.

Their biggest concern is and probably always will be inflation. The feds would rather have a recession than high inflation. Inflation for the last few years:

2001: 1.6%
2002: 2.4%
2003: 1.9%
2004: 3.3%
2005: 3.4%

Inflation has been going up, up, and up. Thus, the feds really want to keep it under control. The average inflation from 1913 to now is 3.3%. Thus inflation is (barely) above average already. They really want to prevent any further increases. And to the feds, a recession is better than any more inflation increases.

That, and the economy is fairly good now, and the interest rates are still low. The feds really don't have any real reason not to raise it a bit.

 

[CSMR]

Originally posted by: jlmadyson
Text

WASHINGTON (AP) - The Senate on Tuesday approved the nomination of Ben Bernanke to be the next chairman of the Federal Reserve, the most influential economic policy job in the world. Bernanke, 52, was cleared on a voice vote after a short debate in the chamber amid strong bipartisan support. He succeeds Alan Greenspan, 79, who retires Tuesday after 18 1/2 years, making him the second-longest serving chairman at the central bank.

Not seeing any significant difference here between Bernake and Greenspan. The Fed today continued with their 14th consecutive quarter point fed hike. I'm not sure Bernake's fed targeting initiative is distinctly different than what Greenspan has been doing overall.

I think the point of targeting is that you are committed to a strategy, so even if you end up taking the same strategy, it's different because people knew you were targeting and respond accordingly. But if Greenspan had a reputation for controlling inflation, it might be just as if he explicitly targeted it.

 

[imported_Tango]

Originally posted by: dullard

Originally posted by: Genx87
I am surprised they raised it again after the 4th qtr. They must have seen something on the internals that indicates it wont be a recurring theme.

Their biggest concern is and probably always will be inflation. The feds would rather have a recession than high inflation. Inflation for the last few years:

2001: 1.6%
2002: 2.4%
2003: 1.9%
2004: 3.3%
2005: 3.4%

Inflation has been going up, up, and up. Thus, the feds really want to keep it under control. The average inflation from 1913 to now is 3.3%. Thus inflation is (barely) above average already. They really want to prevent any further increases. And to the feds, a recession is better than any more inflation increases.

That, and the economy is fairly good now, and the interest rates are still low. The feds really don't have any real reason not to raise it a bit.

Plus, the spread with EU and Japanese rates is now likely to help the US dollar.

 

[LegendKiller]

Why be surprised? Rates are still too low to stop housing stupidity. Market is growing at a decent clip. I think they should keep it goin.

 

[LegendKiller]

Originally posted by: dullard

Originally posted by: Genx87
I am surprised they raised it again after the 4th qtr. They must have seen something on the internals that indicates it wont be a recurring theme.

Their biggest concern is and probably always will be inflation. The feds would rather have a recession than high inflation. Inflation for the last few years:

2001: 1.6%
2002: 2.4%
2003: 1.9%
2004: 3.3%
2005: 3.4%

Inflation has been going up, up, and up. Thus, the feds really want to keep it under control. The average inflation from 1913 to now is 3.3%. Thus inflation is (barely) above average already. They really want to prevent any further increases. And to the feds, a recession is better than any more inflation increases.

That, and the economy is fairly good now, and the interest rates are still low. The feds really don't have any real reason not to raise it a bit.

You might want to check your historical inflation information. According to Here inflation average since 1914 has been 4.55%.

 

[dullard]

Originally posted by: LegendKiller
You might want to check your historical inflation information. According to Here inflation average since 1914 has been 4.55%.

I briefly scanned that page and didn't see 4.55% anywhere. I even did a Google search on inflationdata.com for 4.55% and Google couldn't find it. Could you please point me to where they incorrectly list 4.55%?

I get my data from the same Brueau of Labor Statistics source that that webpage uses.

CPI Dec 1913: 10.0
CPI Dec 2005: 196.8

Now tell me, which of the following goes from 10.0 to 196.8 in 92 years:

10.0 * (1.032917)^92 = 196.8
10.0 * (1.0455)^92 = 599.5

I'll let you think about that for a while.

 

[LegendKiller]

Sorry, when I was looking at the CPI tables I missed formatting to numbers for 12 years.

Even at 3.42 a deviation of 2 bps isn't anything to worry about. Considering the std dev of inflation is high, even for current periods. It's the long-term trend that they look at.

 

[Bitek]

Does anyone foresee "Ben Bukakke" jokes for the next 18.5 years?

 

[dullard]

Something that I didn't know: Bush to have appointed all 7 governors on the board. The only other presidents to have done that are Reagan and Roosevelt.

Bernanke "uses a preset formula for interest rate hikes if inflation reached certain levels, even if the economy is experiencing a combination of higher prices and slower growth at the same time." That is, he'd send us into a recession simply to avoid inflation.

I'm ashamed at our congressmen: "Still, Bush's selections to the nation's central banks have barely had any public or even Congressional scrutiny...some leading senators admitted to the media they weren't aware the hearings had even been held...The other recent Fed pick was White House economic staffer Kevin Warsh. He was criticized outside of Congress for a thin resume -- he is only 35, making him the youngest Fed governor in history, and has neither a Ph.D. nor an economics degree." Cronyism at its finest.

 

[jlmadyson]

Fed: Economy entering spring with momentum

WASHINGTON - The economy headed into the spring season with solid momentum, helping to generate more employment opportunities and keep factories humming, the Federal Reserve reported Wednesday.

Overall economic activity continued to expand into early March even as the housing market flashed fresh signs of cooling after a red-hot, five-year stretch of record-high sales, the Fed said in its new snapshot of business activity around the country.

Thus far, the strengthening labor market is translating into modest wage gains for the average worker in most of the Fed regions, the report said. Fed officials closely monitor wages ? as well as the prices of goods and services ? for insight into the nation?s inflation climate.

In general, consumer prices also are rising at a modest pace even though businesses are coping with high energy prices and rising costs for other materials, such as cement, lumber and copper, the Fed said.

The survey is based on information supplied by the 12 regional Federal Reserve banks. The information for the survey was collected before March 6. It will figure into discussions at the Federal Reserve?s next meeting to examine interest rates on March 27-28.

That March meeting will be the first for Federal Reserve Chairman Ben Bernanke, who took the helm on Feb. 1. He succeeded Alan Greenspan, who retired after 18-plus years running the central bank.

Many economists predict the Fed will boost short-term interest rates by one-quarter percentage point to 4.75 at that meeting to keep the economy and inflation on an even keel. The Fed under former chairman Greenspan has been tightening credit for nearly two years.

Richard Yamarone, economist at Argus Research, said the Fed survey would justify another rate increase. ?Inflation pressures are rising, but at a subdued pace,? he said.

Although economists have different views on how many more rate increases will be ordered by the Fed in the coming months, most believe that the central bank?s rate-raising campaign probably will come to a close sometime this year.

Deciding when to stop tightening credit will be one of Bernanke?s first challenges. If he stops too soon, inflation could flare up. If he waits too long, the economy could be hurt.

Looking at the labor market, ?employment continued to increase in most locations and in many sectors of the economy,? the Fed survey said. ?Almost every district reported shortages of high-skilled workers.?

For most Fed districts, wages increased ?modestly? on average. The exception: the Philadelphia region, where businesses said they expected wages to go up faster this year than last year as ?firms stepped up counteroffers to workers who were planning to change jobs.?

The Fed survey also said that ?a shortage of qualified workers for skilled positions in finance, construction and manufacturing industries resulted in more rapid increases in pay for those workers.?

San Francisco
The Twelfth District's solid economic expansion remained on track during the survey period of mid-January through the beginning of March. Contacts reported modest price and wage inflation on net, despite elevated prices for energy-intensive products and faster wage growth for scattered groups of workers with specialized skills. Retail sales grew compared with year-earlier levels, and service providers saw robust demand. District manufacturers reported generally solid demand. Orders and sales grew for providers of agricultural and resource-related products. Activity in residential real estate markets generally remained at high levels but slowed further in some areas, while demand for commercial real estate continued to improve. District banks reported net growth in loan demand and very good credit quality.

On the manufacturing front, ?the strength in demand for factory goods was widespread across industries,? the Fed survey said. Some of the sectors facing strong demand included construction materials, electrical equipment, defense products, tractor trailers, heavy trucks and heavy machinery.

The report also said that consumer spending continued to grow and that reports on tourism were mostly positive.

Turning to the housing market, homebuilders in many Fed regions indicated that new-home sales ?were trending down? but business contacts in the Cleveland, Kansas City and Dallas regions said demand for new homes had improved.

Half of the Fed?s regions said the number of homes for sale had increased. Home price appreciation, meanwhile, slowed in many areas.

Still wondering how many more fed hikes are left, should be closer to the end I believe, two to three more perhaps.

 

[jlmadyson]

Fed raises rates, keeps options open

WASHINGTON (Reuters) - Federal Reserve officials, meeting for the first time under new chief Ben Bernanke, lifted U.S. interest rates on Tuesday a 15th straight time and said further moves may be needed to keep inflation at bay.

As widely expected, the U.S. central bank's rate-setting Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate target a quarter-percentage point to 4.75 percent, the highest level since April 2001.

In a statement announcing its action, the Fed repeated that further policy firming may be needed, suggesting it was comfortable with financial market expectations for rates climbing to 5 percent in coming months.

Interest rates going to keep going up, mortgage rates certainly will continue the upward trend.

 

[conjur]

Originally posted by: jlmadyson
Fed raises rates, keeps options open

WASHINGTON (Reuters) - Federal Reserve officials, meeting for the first time under new chief Ben Bernanke, lifted U.S. interest rates on Tuesday a 15th straight time and said further moves may be needed to keep inflation at bay.

As widely expected, the U.S. central bank's rate-setting Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate target a quarter-percentage point to 4.75 percent, the highest level since April 2001.

In a statement announcing its action, the Fed repeated that further policy firming may be needed, suggesting it was comfortable with financial market expectations for rates climbing to 5 percent in coming months.

Interest rates going to keep going up, mortgage rates certainly will continue the upward trend.

The Fed's been raising rates steadily for almost two years now and the funds rate is now up to about where the 10-year and 30-year Treasuries are yielding but mortgage rates have remained rather stable and are still pretty low (imo, they're being kept low to keep the fragile economy going...housing being the only thing keeping things above water)

 

[jlmadyson]

Originally posted by: conjur

Originally posted by: jlmadyson
Fed raises rates, keeps options open

WASHINGTON (Reuters) - Federal Reserve officials, meeting for the first time under new chief Ben Bernanke, lifted U.S. interest rates on Tuesday a 15th straight time and said further moves may be needed to keep inflation at bay.

As widely expected, the U.S. central bank's rate-setting Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate target a quarter-percentage point to 4.75 percent, the highest level since April 2001.

In a statement announcing its action, the Fed repeated that further policy firming may be needed, suggesting it was comfortable with financial market expectations for rates climbing to 5 percent in coming months.

Interest rates going to keep going up, mortgage rates certainly will continue the upward trend.

The Fed's been raising rates steadily for almost two years now and the funds rate is now up to about where the 10-year and 30-year Treasuries are yielding but mortgage rates have remained rather stable and are still pretty low (imo, they're being kept low to keep the fragile economy going...housing being the only thing keeping things above water)

There is a reason the market took such a hit after this news. Mortgage rates are low, but as they creep towards 7% the housing market will continue to take a hit as well as the overall consumer relative to other lending rates. Also the fed statement really didn?t indicate they would stop at 5 but more rates may be in the works, which is really what the market doesn't want to hear. However, there are plenty of other places for investment than housing and CDs are becoming much more competitive.

 

[conjur]

Yeah...saw the statement that more raises likely. And banks are raising prime lending to 7.75%.


POP! goes the bubble.

 

[jlmadyson]

Stocks Surge As FOMC Sees Hikes Ending

Dow Up More Than 140 Points As FOMC Members See End to Interest Rate Hikes

NEW YORK Apr 18, 2006 (AP)? News that Federal Reserve policymakers believed their string of interest rate hikes was likely nearing an end sent stocks soaring Tuesday, carrying the Dow Jones industrials up more than 140 points. The news helped offset the effects of oil prices that passed $71 a barrel.

Wall Street was already climbing in mid-afternoon when the Fed released minutes of the Federal Open Market Committee's March 27-28 meeting that showed most of the panel's members "thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy."

The release of the minutes was just what an intererest rate-weary market wanted to hear. The Fed has raised rates 15 times in a row since June 2004, putting the nation's benchmark rate at 4.75 percent.

In afternoon trading, the Dow Jones industrial average gained 143.84, or 1.3 percent, to 11,217.62.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 16.53, or 1.3 percent, to 1,301.86, and the Nasdaq composite index rose 33.70, or 1.5 percent, to 2,344.86.

Traders had already gotten some reassurance Tuesday from the Labor Department's report that core wholesale inflation, which excludes volatile energy and food prices, rose just 0.1 percent last month. Overall inflation rose 0.5 percent, the fastest pace in three months, after a 1.4 percent drop in February. However, the core number indicated that the effects of higher oil are not making their way throughout the economy.

Any sign of rising inflation has sent stock prices falling, as fighting inflation has been the Fed's primary concern. However, while the economy has been expanding, inflation has been under control.

The surge in energy prices, caused by increasing tension over Iran's nuclear energy program and worries about disruption to supplies from Nigeria, pushed crude to a record $71.15 on the New York Mercantile Exchange.

But stock investors, reassured by past experience, appeared to be looking past the price of crude, analysts said.

"We have seen it before and that's the key. It's not a new level and we didn't really see demand taper off, we didn't really see economic activity slow down because of it," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. "A year ago we thought $70 would be the death knell for consumers. It wasn't."

Energy stocks rose on oil prices. Shares of Exxon Mobil Corp. rose $1.19, or 1.9 percent, to $63.24. Valero Energy Corp. gained $1.62, or 2.5 percent, to trade at $67.27.

Other gainers included Merrill Lynch & Co. Inc., which reported sharply lower first-quarter earnings but still beat analyst estimates. Merrill rose 41 cents, or 0.5 percent, to $78.87.

Johnson & Johnson also rose, up 18 cents to $57.83, after the health products company reported a 17 percent increase in first-quarter profits, just beating estimates.

IBM Corp. added $1.37, or 1.7 percent, to trade at $83..01 ahead of the company's announcement of its quarterly results.

Advancing issues outnumbered decliners by a 3-to-1 ratio on the New York Stock Exchange, where volume came to 901.18 million shares, up from 620.12 million shares traded at the same point Monday.

The Russell 2000 index of smaller companies was up 14.32, or 1.9 percent, to 763.79.

Overseas, Japan's Nikkei stock average rose 1.4 percent. Britain's FTSE 100 gained 0.2 percent, Germany's DAX index fell 0.3 percent, and France's CAC-40 declined 0.1 percent.

:thumbsup:

 

[RMich]

My hunch, from what I know of Bernanke, is that you shouldn't be confident that rate hikes will be ending soon. This is not to say that Bernanke is being dishonest -- quite the opposite. His academic position has always been that Federal Reserve policy making should be as transparent as possible. What that means, under current circumstances, is that the Federal Reserve is being frank about the fact that just now, many members of the FOMC think tightening ought to end soon. Who wouldn't consider ending the rate hikes? But if inflation continues (have you bought gas lately?) then the case for continued tightening becomes stronger and the Federal Reserve will reluctantly continue its rate hikes. Greenspan was much more a product of the "if you can't impress 'em with your brilliance, baffle them with your bullshit" school of thought. He'd have kept his cards closer to his chest, so that if he decided to raise rates throughout the summer, people would credit him with following a fixed plan from which he had not deviated.

In short, I think the recent announcement of "end of tightening is at hand" accurately reflects current Fed sentiment, but that the Fed itself is none too sure what comes next. What comes next, it is still possible, is continued rate hikes. Greenspan would have kept you in the dark until the end of hikes was a fait accompli, but that is not Bernanke's style.

 

[catnap1972]

Originally posted by: RMich
My hunch, from what I know of Bernanke, is that you shouldn't be confident that rate hikes will be ending soon. This is not to say that Bernanke is being dishonest -- quite the opposite. His academic position has always been that Federal Reserve policy making should be as transparent as possible. What that means, under current circumstances, is that the Federal Reserve is being frank about the fact that just now, many members of the FOMC think tightening ought to end soon. Who wouldn't consider ending the rate hikes? But if inflation continues (have you bought gas lately?) then the case for continued tightening becomes stronger and the Federal Reserve will reluctantly continue its rate hikes. Greenspan was much more a product of the "if you can't impress 'em with your brilliance, baffle them with your bullshit" school of thought. He'd have kept his cards closer to his chest, so that if he decided to raise rates throughout the summer, people would credit him with following a fixed plan from which he had not deviated.

In short, I think the recent announcement of "end of tightening is at hand" accurately reflects current Fed sentiment, but that the Fed itself is none too sure what comes next. What comes next, it is still possible, is continued rate hikes. Greenspan would have kept you in the dark until the end of hikes was a fait accompli, but that is not Bernanke's style.

Rates are going to keep going up (WAY up)...this you can count on.