Monday, March 26, 2012
Obama picks Dartmouth head for top job at World Bank
From The Hindu
U.S. President Barack Obama has nominated Jim Yong Kim, a Korean-born public health specialist who is now the President of Dartmouth College, for the role of President of the World Bank.
Following the recent announcement by current Bank President Robert Zoellick that he would step down from his role at the end of June, there has been much speculation on who his successor would be.
Questions were also raised about whether a representative of a non-U.S. country could be considered for the role, which has traditionally been held by U.S. citizens only, alongside European occupancy of the Managing Director role at the Bank's sister institution, the International Monetary Fund.
With numerous emerging economies indicating an interest in the nomination process, two candidates who have already joined the race are Nigerian Finance Minister Ngozi Okonjo-Iweala and Jose Antonio Ocampo, former Finance Minister of Colombia. Additionally, U.S. economist Jeffrey Sachs was said to have “the backing of several developing countries.”
Apart from these candidates, whose nomination challenges appear credible, rumours in Washington have hinted at a wide field of potential contenders, from Hillary Clinton, U.S. Secretary of State and Larry Summers, former Treasury Secretary to Susan Rice, U.S. Ambassador to the UN, and PepsiCo boss Indra Nooyi.
Yet the race appeared to bend in favour of Dr. Kim, as President Obama described the former Chair of the Department of Global Health and Social Medicine at Harvard Medical School as “the right person to carry on [Zoellick's] legacy, and I know his unique set of skills and years of experience will serve him well.”
In nominating Dr. Kim, Mr. Obama underscored the importance of the Bank to the U.S. more broadly, saying, “When an entrepreneur can start a new business, it creates jobs in their country, but also opens up new markets for our country... And ultimately, when a nation goes from poverty to prosperity, it makes the world stronger and more secure for everybody. That's why the World Bank is so important.”
Labels: Dartmouth College, global economy, Jim Yong Kim, World Bank Presidential candidate
Sunday, March 25, 2012
Study identifies lapses in World Bank crisis response
From The Hindu
During its response to the worst financial-economic crisis in a generation, the World Bank failed to adequately tailor its lending patterns to the severity of the downturn across nations and today finds itself with potentially insufficient headroom to respond to a second crisis of similar or greater magnitude to the one in 2008-09, should there be one.
These results were part of a phase-two study of the Bank’s crisis response, presented in a report, titled The World Bank’s Response to the Global Economic Crisis: Phase II. The study report was unveiled on Thursday by its authors at the Independent Evaluation Group (IEG), which is a member of the World Bank group of institutions but reports to the Bank’s Board of Executive Directors rather than its management.
Speaking to The Hindu on both the achievements and shortcomings of the Bank’s response Anjali Kumar, lead author of the report and a Lead Economist with the IEG, said that while the headroom that the Bank had in the previous crisis would have permitted a doubling of lending by the International Bank for Reconstruction and Development – the Bank division focussed on middle and lower-income nations – by around September 2008, “Today it would be in a position to undertake business as usual lending... [yet] anything that approaches the previous global crisis could not be handled.”
While equity-to-loan ratios of the Bank at the outset of the crisis were around 37.5 per cent, the most recent financial figures released by the Bank for quarter closing September 2011 suggested it had come down to 27 per cent, a “precipitous drop for two years, [and it was] projected to drop for next three to four years,” Dr. Kumar noted, adding that low market rates of interest had not helped in this scenario.
Regarding the inadequate change in the Bank’s pre-crisis lending patterns, the IEG suggested that in part this phenomenon was driven by country demand for Bank lending, and hence countries that were most engaged with the Bank before the crisis – its “good clients” such as India and Indonesia – tended to approach the Bank more and in some cases get loans more quickly.
Other factors affected Bank lending too, such as the limited fiscal capacity of certain countries and the fact that some countries went to other lenders such as Russia’s engagement with the European Bank for Reconstruction and Development and Ecuador and Venezuela’s reliance on the Inter-American Development Banks.
Yet when the IEG conducted an analysis of patterns of stress across countries using high-frequency data and mapped that to Bank lending patterns it was clear that low resource allocation at the start of the crisis and the assumption that all financing demands could be accommodated from existing patterns of lending had played a role in the Bank’s ultimate lending decisions, Dr. Kumar explained.
Responding to the results of the IEG’s assessment Angela Walker, World Bank South Asia Region Spokesperson said, “This evaluation properly recognizes the World Bank Group's unprecedented level and speed of help during the crisis and we agree with the finding that the majority of countries suffering high levels of stress benefited from [Bank] lending.
Yet in comments to The Hindu Ms. Walker noted, “However, we disagree with the evaluation's analysis of the Bank's total response.”
In this context Bank officials drew attention to the IEG report’s findings that “The unprecedented volume of the Bank Group’s response….accelerations in processing efficiency and disbursements….the positive role, in crisis-response, of well-established country dialogue and country knowledge, the greater need to balance country focus with a global strategy notwithstanding….and the Bank’s comfortable financial position at the start of the crisis, which was a key element underpinning its crisis response.”
Touching on some India-specific results, Dr. Kumar said that there were some delays in the response after the downturn had kicked off. In particular, the Government of India had sent a written request to the Bank in November 2008 for increased support, and although the Bank initially aimed for operations to begin by March 2009, the proposal did not reach the Bank’s Board until September 2009, and the funds were not released until April of following year.
Nevertheless India was one of the Bank’s “largest borrowers in crisis,” Dr. Kumar noted, adding that it was sanctioned $7 billion in lending during crisis, of which $5 billion was tied to crisis-specific operations. Despite these large-scale commitments, some of them remained unrealised, including $3 billion for the financial sector were cancelled.
The IEG also noted that while much of the “budget-support” lending that the Bank undertook in India had helped signal the strength of public sector banks in the country, yet many of these public sector banks had capital adequacy ratios conforming to Indian government norms at the outset of crisis.
This again raised the question of Bank lending priorities during the crisis – for example whether it was a priority for the Bank to provide precautionary buffer capital to banks that were adequately capitalised.
During its response to the worst financial-economic crisis in a generation, the World Bank failed to adequately tailor its lending patterns to the severity of the downturn across nations and today finds itself with potentially insufficient headroom to respond to a second crisis of similar or greater magnitude to the one in 2008-09, should there be one.
These results were part of a phase-two study of the Bank’s crisis response, presented in a report, titled The World Bank’s Response to the Global Economic Crisis: Phase II. The study report was unveiled on Thursday by its authors at the Independent Evaluation Group (IEG), which is a member of the World Bank group of institutions but reports to the Bank’s Board of Executive Directors rather than its management.
Speaking to The Hindu on both the achievements and shortcomings of the Bank’s response Anjali Kumar, lead author of the report and a Lead Economist with the IEG, said that while the headroom that the Bank had in the previous crisis would have permitted a doubling of lending by the International Bank for Reconstruction and Development – the Bank division focussed on middle and lower-income nations – by around September 2008, “Today it would be in a position to undertake business as usual lending... [yet] anything that approaches the previous global crisis could not be handled.”
While equity-to-loan ratios of the Bank at the outset of the crisis were around 37.5 per cent, the most recent financial figures released by the Bank for quarter closing September 2011 suggested it had come down to 27 per cent, a “precipitous drop for two years, [and it was] projected to drop for next three to four years,” Dr. Kumar noted, adding that low market rates of interest had not helped in this scenario.
Regarding the inadequate change in the Bank’s pre-crisis lending patterns, the IEG suggested that in part this phenomenon was driven by country demand for Bank lending, and hence countries that were most engaged with the Bank before the crisis – its “good clients” such as India and Indonesia – tended to approach the Bank more and in some cases get loans more quickly.
Other factors affected Bank lending too, such as the limited fiscal capacity of certain countries and the fact that some countries went to other lenders such as Russia’s engagement with the European Bank for Reconstruction and Development and Ecuador and Venezuela’s reliance on the Inter-American Development Banks.
Yet when the IEG conducted an analysis of patterns of stress across countries using high-frequency data and mapped that to Bank lending patterns it was clear that low resource allocation at the start of the crisis and the assumption that all financing demands could be accommodated from existing patterns of lending had played a role in the Bank’s ultimate lending decisions, Dr. Kumar explained.
Responding to the results of the IEG’s assessment Angela Walker, World Bank South Asia Region Spokesperson said, “This evaluation properly recognizes the World Bank Group's unprecedented level and speed of help during the crisis and we agree with the finding that the majority of countries suffering high levels of stress benefited from [Bank] lending.
Yet in comments to The Hindu Ms. Walker noted, “However, we disagree with the evaluation's analysis of the Bank's total response.”
In this context Bank officials drew attention to the IEG report’s findings that “The unprecedented volume of the Bank Group’s response….accelerations in processing efficiency and disbursements….the positive role, in crisis-response, of well-established country dialogue and country knowledge, the greater need to balance country focus with a global strategy notwithstanding….and the Bank’s comfortable financial position at the start of the crisis, which was a key element underpinning its crisis response.”
Touching on some India-specific results, Dr. Kumar said that there were some delays in the response after the downturn had kicked off. In particular, the Government of India had sent a written request to the Bank in November 2008 for increased support, and although the Bank initially aimed for operations to begin by March 2009, the proposal did not reach the Bank’s Board until September 2009, and the funds were not released until April of following year.
Nevertheless India was one of the Bank’s “largest borrowers in crisis,” Dr. Kumar noted, adding that it was sanctioned $7 billion in lending during crisis, of which $5 billion was tied to crisis-specific operations. Despite these large-scale commitments, some of them remained unrealised, including $3 billion for the financial sector were cancelled.
The IEG also noted that while much of the “budget-support” lending that the Bank undertook in India had helped signal the strength of public sector banks in the country, yet many of these public sector banks had capital adequacy ratios conforming to Indian government norms at the outset of crisis.
This again raised the question of Bank lending priorities during the crisis – for example whether it was a priority for the Bank to provide precautionary buffer capital to banks that were adequately capitalised.
Labels: financial crisis, financial meltdown, global economic crisis, global economy, World Bank
Saturday, November 05, 2011
Occupy protesters' repression stuns U.S.
While the Occupy Wall Street movement that began in New York on September 17 captured the imagination of the world for its reliance on non-violent civil disobedience, recent weeks have seen the centre of gravity of the protests move to Oakland, California, where the unprecedented scale of violent repression by police has stunned the nation.
Searing criticism was levelled at the Oakland police and Oakland Mayor Jean Quan on October 26 after a particularly vicious attack by police on Occupy protester and Iraq veteran Scott Olsen (24), who was hospitalised for a fractured skull and brain swelling when he was hit by a “police projectile,” possibly a teargas canister.
The violence continued this week when several general strikes by the protesters were greeted with mass arrests and tear-gas deployment by the Oakland police. Earlier, police were also alleged to have used other non-lethal weapons to quell the growing protests in the city, including rubber bullets, baton rounds and flash-bang grenades.
Three separate instances of police resorting to teargas use were observed on Wednesday after protesters, allegedly numbering over 30,000, led the general strike in the city and managed to shut down the Oakland's port and downtown areas.
While Oakland police were said to be under a formal investigation over the incident involving Mr. Olsen, earlier this week the Oakland Police Officers' Association issued an open letter to the citizens of Oakland in which it criticised Ms. Quan and her administration for the handling of the protests.
The letter reportedly noted that while on October 25 Mayor Quan had ordered the police to clear out encampments at Frank Ogawa Plaza the police were compelled to do so despite being fully aware that past protests in Oakland had resulted in rioting, violence and destruction of property.
In a statement of solidarity with the Occupy protesters, the OPOA said in its letter, “We, too, are the 99 per cent fighting for better working conditions, fair treatment and the ability to provide a living for our children and families.”
Labels: economic inequality, global economy, Occupy Wall Street, Port of Oakland, U.S. economy, U.S. port
Tuesday, August 23, 2011
U.S. reportedly investigating S&P for improper rating
From The Hindu
The United States Government has launched a sweeping investigation into the mortgage securities ratings process at Standard & Poor’s, the credit rating agency that found itself in the eye of a storm less than two weeks ago after it downgraded the U.S.’ cherished AAA rating.
The U.S. Justice Department was said to be looking into the specific question of whether S&P “improperly rated dozens of mortgage securities in the years leading up to the financial crisis... [and] was asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S&P business managers,” according to the New York Times.
Quoting unnamed sources who were reportedly questioned by government officials on the matter ,the report said that the current investigation however began before S&P cut the U.S.’ credit rating.
Nevertheless, news of the latest inquiry comes on the back of sharp criticism of S&P in the U.S. Congress and White House, both of which have challenged the “agency’s secretive process, its credibility and the competence of its analysts”.
While there was no information on whether the other two top credit rating agencies, Moody’s and Fitch, were also involved in the investigation, the rating agency industry as a whole has been attacked for making record profits during the boom years even as they failed to predict the onset of mortgage security defaults that culminated in the collapse of the financial system.
S&P’s downgrade of the U.S.’ debt from AAA to AA+ earlier this month, based on its perception that the deficit reduction measures agreed by the administration were insufficient to stabilise national debt, saw further market turmoil in its wake as the downgrade triggered a massive global sell-off.
While the Justice Department declined to comment on the reported investigation of S&P, the New York Times quoted S&P spokesman Ed Sweeney as saying, “S&P has received several requests from different government agencies over the last few years. We continue to cooperate with these requests. We do not prevent such agencies from speaking with current or former employees.”
Labels: downgrade, global economy, Standard and Poor, U.S. debt crisis
Need for long-term approach to social safety nets: World Bank
From The Hindu
In a review of strategies for building Social Safety Nets (SSNs) in developing countries, the Independent Evaluation Group of the World Bank said this week that the countries that had invested in SSNs during times of economic prosperity were better equipped to handle the current economic downturn than those that had not invested in this area.
The study, Social Safety Nets: An Evaluation of World Bank Support, 2000–2010, emphasised the temporal dimension of SSN investments by developing country governments, arguing in particular that once the downturn took hold, low-income countries with tighter budgets “expressed less demand for SSNs as essential elements of their poverty reduction programs.”
Touching upon the Bank’s role in helping spur SSN-development among its member countries the IEG study said, “While the Bank’s SSN programs generally achieved their immediate objectives, the study pointed out that many programs were not adequately anchored in a longer-term strategy for SSN development in countries.”
Speaking at the release of the study its main author Jennie Litvack said,“The World Bank needs to maintain its recent momentum and increase engagement in low-income countries, where safety nets are important to protect the poorest.” Ms. Litvack added that it was encouraging that SSNs were being addressed by the Bank’s management as part of its new social protection strategy.
The study had praise for some large middle-income countries such as India, which it noted had been at forefront of the SSN revolution. This implies that knowledge, work and South-South learning in particular [are] highly significant to the ongoing success of SSNs worldwide.”
Yet, there were also concerns regarding the distribution of the Bank’s funding for SSNs worldwide, with the top ten borrowers for SSNs over the last decade representing 70 per cent of total Bank SSN lending but only 15 percent of poor people in Bank client countries.
That this trend was a clarion call for better SSN development in some lower-income countries was underscored by the fact that when the SSN lending is compared to overall Bank lending, the results were reversed. The top ten borrowers in overall Bank lending represented 52 per cent of Bank lending and 68 percent of the poor, according to the study.
Emphasising the main lesson coming out of this evaluation IEG Director-General Vinod Thomas said, “Countries that had prepared themselves during stable times by building permanent social safety nets – such as Chile, Colombia or Georgia – were better positioned to respond than those that had not when the crises hit.”
Mr. Thomas, who in an earlier interview with The Hindu had cautioned of a spike in global poverty numbers during the economic downturn, added that the Bank had been more effective in helping countries where it was “already engaged over the past decade through lending, advisory services or policy dialogue.”
In a review of strategies for building Social Safety Nets (SSNs) in developing countries, the Independent Evaluation Group of the World Bank said this week that the countries that had invested in SSNs during times of economic prosperity were better equipped to handle the current economic downturn than those that had not invested in this area.
The study, Social Safety Nets: An Evaluation of World Bank Support, 2000–2010, emphasised the temporal dimension of SSN investments by developing country governments, arguing in particular that once the downturn took hold, low-income countries with tighter budgets “expressed less demand for SSNs as essential elements of their poverty reduction programs.”
Touching upon the Bank’s role in helping spur SSN-development among its member countries the IEG study said, “While the Bank’s SSN programs generally achieved their immediate objectives, the study pointed out that many programs were not adequately anchored in a longer-term strategy for SSN development in countries.”
Speaking at the release of the study its main author Jennie Litvack said,“The World Bank needs to maintain its recent momentum and increase engagement in low-income countries, where safety nets are important to protect the poorest.” Ms. Litvack added that it was encouraging that SSNs were being addressed by the Bank’s management as part of its new social protection strategy.
The study had praise for some large middle-income countries such as India, which it noted had been at forefront of the SSN revolution. This implies that knowledge, work and South-South learning in particular [are] highly significant to the ongoing success of SSNs worldwide.”
Yet, there were also concerns regarding the distribution of the Bank’s funding for SSNs worldwide, with the top ten borrowers for SSNs over the last decade representing 70 per cent of total Bank SSN lending but only 15 percent of poor people in Bank client countries.
That this trend was a clarion call for better SSN development in some lower-income countries was underscored by the fact that when the SSN lending is compared to overall Bank lending, the results were reversed. The top ten borrowers in overall Bank lending represented 52 per cent of Bank lending and 68 percent of the poor, according to the study.
Emphasising the main lesson coming out of this evaluation IEG Director-General Vinod Thomas said, “Countries that had prepared themselves during stable times by building permanent social safety nets – such as Chile, Colombia or Georgia – were better positioned to respond than those that had not when the crises hit.”
Mr. Thomas, who in an earlier interview with The Hindu had cautioned of a spike in global poverty numbers during the economic downturn, added that the Bank had been more effective in helping countries where it was “already engaged over the past decade through lending, advisory services or policy dialogue.”
Labels: global economy, Social Safety Nets, SSN, World Bank
Friday, February 18, 2011
Bernanke warns of destabilising capital flows
From The Hindu
Ben Bernanke, Chairman of the U.S. Federal Reserve, said that challenges to macroeconomic adjustment and financial stability such as those seen during the financial crisis of 2008, arose in part because “the rules of the game of the international monetary system... are either poorly articulated or not observed by key countries.”
In a speech this week at the Banque de France Financial Stability Review launch event, Mr. Bernanke did not name any country in particular but said that emerging market economies had not followed through with “the policy responses that countries are expected to take to help foster a balanced global economy over time.”
Savings glut
Quoting a recent paper that he had authored, in which he identified a “global savings glut” as one of the factors that created some of the pre-conditions for the crisis, he said that it was an empirical fact that the global saving glut countries including “emerging Asian economies and Middle Eastern oil exporters” evinced a “strong preference for very safe and liquid U.S. assets... especially Treasury and agency securities.”
However, Mr. Bernanke added, the preference by many investors for perceived safety had created strong incentives for U.S. financial engineers to develop investment products that “transformed” risky loans into highly rated securities.
Thus, he said, it was remarkable that even though a large share of new U.S. mortgages during the housing boom were of weak credit quality, financial engineering resulted in the overwhelming share of private-label mortgage-related securities being rated AAA. “The underlying contradiction was, of course, ultimately exposed, at great cost to financial stability and the global economy,” Mr. Bernanke noted.
Touching upon recent macroeconomic concerns the Fed Chairman cautioned that while the global financial crisis was receding, capital flows were “once again posing some notable challenges for international macroeconomic and financial stability.”
Negative spillovers
He said that such capital flows reflected in part the “continued two-speed nature of the global recovery, as economic growth in the emerging markets is far outstripping growth in the advanced economies.”
Warning of some of the dangers of capital from advanced economies flooding emerging markets Mr. Bernanke said that some observers argued that monetary policies in advanced economies were generating “negative spillovers.”
“In particular, concerns have centred on the strength of private capital flows to many emerging market economies, which, depending on their policy responses, could put upward pressure on their currencies, boost their inflation rates, or lead to asset price bubbles,” he said.
Labels: Ben Bernanke, capital flows, financial stability, global economy
Thursday, June 10, 2010
Bernanke still cautious on recovery prospects
From The Hindu
Ben Bernanke, Chairman of the Federal Reserve, struck a note of cautious and qualified optimism regarding the possibility of a sustained recovery in the United States' economy.
On the down-side risks Mr. Bernanke warned that market concerns have mounted over the ability of Greece and other European countries to manage their 'sizable' budget deficits and 'high levels of public debt'; and also the U.S.' own fiscal position had deteriorated 'appreciably'.
Yet, he noted, in a speech before the Budget Committee of the House of Representatives, "The recovery in economic activity that began in the second half of last year has continued at a moderate pace so far this year." He also added that on the inflation front, recent data continued to show a subdued rate of increase in consumer prices.
He added that the labour market, which was hard hit by the recession, had begun to show some 'modest improvement recently', in terms of employment — 431,000 more people were hired in May — hours of work, and labour income.
Markets cheered Mr. Bernanke's comments, rising during trading hours on Wednesday.
Indicating a positive prognosis for economic growth in the U.S., Mr. Bernanke said, "The latest economic projections of Federal Reserve Governors and Reserve Bank presidents… anticipate that real gross domestic product will grow in the neighbourhood of 3.5 per cent over the course of 2010 as a whole and at a somewhat faster pace next year."
Regarding the sources of growth in aggregate demand Mr. Bernanke cautioned that consumer spending was likely to increase at a moderate pace going forward, although it would be supported by a "gradual pickup in employment and income, greater consumer confidence, and some improvement in credit conditions".
Underscoring the role of the business sector in driving growth he said, that looking forward, investment in new equipment and software was expected to be supported by healthy corporate balance sheets, relatively low costs of financing of new projects, increased confidence in the durability of the recovery, and the need of many businesses to replace aging equipment and expand capacity 'as sales prospects brighten'.
Emphasising the risks that still remained in the system, primarily emerging from the turmoil in European markets, Mr. Bernanke noted that U.S. financial markets "have been roiled in recent weeks by these developments, which have triggered a reduction in demand for risky assets". He added that broad equity market indexes had declined, and implied volatility has risen 'considerably'.
However, he said that the actions taken by European leaders represented a firm commitment to resolve the prevailing stresses and restore market confidence and stability. "If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest," Mr. Bernanke added.
Labels: Ben Bernanke, Federal Reserve, global economy, U.S. financial markets
Tuesday, March 16, 2010
U.S. Fed to hold rates low as economy slowly improves
From The Hindu
Interest rates will be held in the range of 0-0.25 per cent for an extended period in anticipation of “low rates of resource utilization, subdued inflation trends, and stable inflation expectations”, the United States Federal Reserve’s said today.
Following the Fed’s announcement, equity markets closed at an 18-month high and US Treasury yields declined, according to reports.
The Fed’s Federal Open Market Committee, which last met in January, hinted at improving conditions in the U.S. economy, pointing out that business spending on equipment and software rose “significantly” and household spending expanded moderately. However the latter remained constrained by high unemployment, modest income growth, lower housing wealth, and tight credit, the FOMC cautioned.
The FOMC added a note of explanation on its efforts to bolster the mortgage finance market through credit securities purchases. “To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt,” it said.
Commenting on the overall macroeconomic picture the FOMC said that economic activity continued to strengthen and that “the labor market is stabilizing”. However, it added that employers remain reluctant to add to payrolls. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
Nine out of ten members of the FOMC voted for the FOMC to hold rates low. The one dissent vote came from Thomas M. Hoenig, who held that “continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the build-up of financial imbalances and increase risks to longer-run macroeconomic and financial stability.”
Interest rates will be held in the range of 0-0.25 per cent for an extended period in anticipation of “low rates of resource utilization, subdued inflation trends, and stable inflation expectations”, the United States Federal Reserve’s said today.
Following the Fed’s announcement, equity markets closed at an 18-month high and US Treasury yields declined, according to reports.
The Fed’s Federal Open Market Committee, which last met in January, hinted at improving conditions in the U.S. economy, pointing out that business spending on equipment and software rose “significantly” and household spending expanded moderately. However the latter remained constrained by high unemployment, modest income growth, lower housing wealth, and tight credit, the FOMC cautioned.
The FOMC added a note of explanation on its efforts to bolster the mortgage finance market through credit securities purchases. “To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt,” it said.
Commenting on the overall macroeconomic picture the FOMC said that economic activity continued to strengthen and that “the labor market is stabilizing”. However, it added that employers remain reluctant to add to payrolls. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
Nine out of ten members of the FOMC voted for the FOMC to hold rates low. The one dissent vote came from Thomas M. Hoenig, who held that “continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the build-up of financial imbalances and increase risks to longer-run macroeconomic and financial stability.”
Labels: FOMC, global economy, global recovery, interest rates, Narayan Lakshman, U.S. Federal Reserve
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