Fed chief's warning on jobs lifts bonds hopes
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Tuesday 27 March 2012
Ben Bernanke, the chairman of the US Federal Reserve, warned that the recent reduction in unemployment in the world's largest economy may not be sustainable, reigniting hopes of central bank intervention to stoke the recovery.
Mr Bernanke's declaration frames a debate on the Fed's next steps that will rage for the next four weeks, ahead of a crunch meeting of the central bank's interest rate-setting committee.
The two-day meeting of the Federal Open Market Committee is shaping up to be potentially contentious, since several members and other prominent Fed officials have signalled their opposition to further loosening monetary policy.
In a speech yesterday to the National Association for Business Economics, Mr Bernanke (pictured) defended the Fed's current policies, which include promising an official interest rate of near-zero for the next two and a half years at least and buying long-term government debt to push market rates lower, too. Those debt purchases are being funded by sales from the Fed's portfolio of short-term US government bonds, in a $400bn (£252bn)programme called Operation Twist, which is due to expire in June.
Rapidly declining unemployment had lowered economists' expectations of a further bond buying programme after June, but Mr Bernanke's comments yesterday changed some people's minds. The decline in the jobless rate from 9.1 per cent last summer to 8.3 percent in February was "somewhat out of sync" with the rather modest pace of economic growth, he said, and probably represented a reversal of the higher-than-usual spike in unemployment in the wake of the financial crisis in 2009.
"To the extent that this reversal has been complete, further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies," he said. The comments sparked a triple-digit rise by the Dow Jones Industrial Average and spurred equity market rises around the world. The UK FTSE 100 ended up 47.81 at 5902.70.
The FOMC next meets on 24-25 April, and veteran bond investor Bill Gross predicted it is "likely to hint" at a new round of bond buying.
- 1 2015 General Election: Green party will not appear in TV debate alongside Ukip – says BBC
- 2 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
- 5 Of course, teenage girls need role models – but not like beauty vlogger Zoella
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
Elizabeth Norment dead: House of Cards actress honoured by Kevin Spacey after she dies aged 61
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
Nigel Farage and Frankie Boyle clash over Andrew Lawrence's 'Mock the Week' criticism
iJobs Money & Business
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...