Monday, January 26, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

With economy hazy, Fed is unlikely to shift course

Janet Yellen

Federal Reserve Chairwoman Janet Yellen appears before the Senate Budget Committee to examine the nation's economic and fiscal outlook, on Capitol Hill in Washington, May 8, 2014. This week’'s Federal Reserve meeting is the third at which Yellen will preside as chairwoman since succeeding Ben Bernanke in February. (AP Photo/J. Scott Applewhite, File)

By
June 18, 2014 |

WASHINGTON — When Federal Reserve officials gather this week and Fed Chair Janet Yellen speaks with reporters, investors will be seeking clues to two big questions:

When will the Fed finally start raising short-term interest rates?

And how – and when – will it start unloading its vast investment holdings?

The answers will affect loan rates for individuals and businesses – and perhaps the direction of the economy. Yet few expect to hear anything definitive.

The Fed remains in a tentative wait-and-see stance.

Though the central bank has signaled optimism, officials are unsure how much the economy will strengthen the rest of the year. On Wednesday, the Fed will update its forecasts, and it may downgrade its estimate of growth for 2014 after the government said last month that the economy shrank in the first quarter, depressed by a harsh winter.

On Monday, the International Monetary Fund predicted that the U.S. economy will grow a modest 2 percent this year, below the IMF’s previous estimate of 2.7 percent.

Yellen has suggested that the U.S. unemployment rate, now 6.3 percent, overstates the health of the job market and economy. She’s also expressed concern that a high percentage of the unemployed – 35 percent – have been out of work for six months or more and that pay is scarcely rising for people who do have jobs.

Yet the Fed is getting closer to acting. The minutes of its last meeting in late April indicated that the Fed has begun discussing the tools it could use to finally pull back the extraordinary stimulus it’s provided the U.S. economy since 2008.

This week’s meeting is the third at which Yellen will preside as chair since succeeding Ben Bernanke in February. Analysts expect at least one announcement when the two-day policy meeting ends Wednesday: That the Fed will make a fourth $10 billion cut in the pace of its monthly bond purchases to $35 billion, a sign of a steadily, if slowly, improving economy. The Fed has been buying Treasury and mortgage bonds to try to keep long-term loan rates low to stimulate the economy.

The Fed will likely end its bond purchases this fall, with its investment portfolio nearing $4.5 trillion. But officials have said that even when they stop buying bonds, they don’t plan to start selling any. They plan to keep the Fed’s holdings steady by re-investing maturing bonds. In doing so, the Fed will still exert downward pressure on long-term rates.

The Fed has said it will keep its key short-term rate at a record low near zero for a “considerable time” after its bond purchases end. At her news conference, Yellen will likely avoid being pinned down on how long a “considerable time” might be. Last month, she said the Fed expects to start raising rates once it sees enough progress in restoring full employment and inflation has risen to its 2 percent target rate.

Most Fed members expect the Fed to start raising short-term rates between mid-2015 and 2016. The central bank has stressed that even after it starts raising rates, it will likely keep them unusually low to support the economy.

Minutes of the Fed’s April 29-30 meeting show that officials discussed how best to unwind support for the economy once they begin raising the benchmark short-term rate. The minutes stressed that the discussion shouldn’t be seen as a signal that any rate increase is imminent.

Though the economy may not be growing as fast as the Fed earlier predicted, the job market has shown consistent improvement. Employers have added 200,000-plus jobs for four straight months. The unemployment rate has dropped to a level the Fed hadn’t expected to see until year’s end.

But Yellen has stressed that she is studying barometers of the job market beyond the unemployment rate – from the percentage of long-term unemployed among the jobless to the number of part-time workers who would prefer full-time jobs and the percentage of adults either working or looking for work. By those measures, the job market remains subpar, a reason Yellen has cited for the Fed’s continued support.

Yellen has also expressed worries that the housing recovery may be faltering. In addition, Fed officials have discussed such geopolitical risks as slow growth in Europe and Russia’s aggression toward Ukraine. The newest threat is rising sectarian violence in Iraq, which has sent oil prices up.

Brian Bethune, an economics professor at Tufts University, said that given all the threats that could derail the U.S. economy, the Fed will be careful not to say anything that could push rates up.

“The economy is trying to come back from a very weak quarter,” Bethune said. “The Fed doesn’t want to see long rates go up.”

Bethune said the Fed has leeway to keep rates low because its preferred measure of inflation remains below its 2 percent target.

This week’s meeting will bring new faces to debate the issues. The Senate last week approved the nomination of Stanley Fischer, former head of Israel’s central bank, as the Fed’s vice chair. In addition, Lael Brainard, a former Treasury undersecretary for international affairs, won Senate approval for a vacant board post. Fischer, Brainard and Jerome Powell, who was confirmed for a new term, were all sworn in Monday.

Also, Loretta Mester has succeeded Sandra Pianalto as president of the Fed’s regional bank in Cleveland and will participate for the first time this week.

Analysts see Yellen as firmly in charge of the Fed’s agenda.

“Yellen is still using the Bernanke playbook,” said David Jones, the author of a new history of the Fed. “I think she would like to not raise rates until the fall of next year.”

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Teen finds entrepreneurial path at young age

By Susan Winlow | From Page: A1, 2 Comments | Gallery

 
Time for Relay for Life kickoff event

By Tony Wade | From Page: A2

 
Fairfield schedules workshop on downtown plan

By Susan Hiland | From Page: A3

Suisun Senior Center offers monthly dance

By Susan Hiland | From Page: A3

 
 
Wedding Faire offers one-stop browsing for couples

By Amy Maginnis-Honey | From Page: A3, 1 Comment | Gallery

 
Crab feed tradition continues this week

By Susan Hiland | From Page: A3

Local government agencies post meeting times

By Susan Hiland | From Page: A3

 
.

US / World

 
Millions of GMO insects could be released in Florida Keys

By The Associated Press | From Page: A1

Boy shot by Los Angeles deputies treated for graze wound

By The Associated Press | From Page: A4

 
US gas prices fell 13 cents per gallon, but expected to rise

By The Associated Press | From Page: A4

2 Marines identified in deadly California helicopter crash

By The Associated Press | From Page: A4

 
Santa Ana winds knock out power to thousands in California

By The Associated Press | From Page: A4

Obama to seek wilderness designation for Alaska refuge

By The Associated Press | From Page: A5

 
Navy wants to increase use of sonar-emitting buoys

By The Associated Press | From Page: A5

 
Ukraine: Phone calls prove rebels attacked city, killed 30

By The Associated Press | From Page: A5

Zambia: Edgar Lungu sworn in as new president

By The Associated Press | From Page: A5

 
Greek radical left wins election, threatening market turmoil

By The Associated Press | From Page: A5

‘Potentially historic’ storm headed for Northeast

By The Associated Press | From Page: A5

 
Balloon crew launches in bid to break 2 major records

By The Associated Press | From Page: A5

Obama: Counterterrorism operations in Yemen not affected

By The Associated Press | From Page: A5

 
Zoo offers creepy way for lovelorn to get even with exes

By The Associated Press | From Page: A9

 
.

Opinion

Democracy or republic?

By Earl Heal | From Page: A8, 7 Comments

 
Editorial Cartoon: Jan. 26, 2015

By Daily Republic Syndicated Content | From Page: A8

 
Do elected officials get it?

By Letter to the Editor | From Page: A8, 6 Comments

 
.

Living

Community Calendar: Jan. 26, 2015

By Susan Hiland | From Page: A2

 
Today in History: Jan. 26, 2015

By The Associated Press | From Page: A2

Horoscope Jan. 27, 2015

By Holiday Mathis | From Page: B5

 
My sister is jobless and homeless and I’m not sure how to help

By Kathy Mitchell and Marcy Sugar | From Page: A7

 
Horoscope Jan. 26, 2015

By Holiday Mathis | From Page: A7

.

Entertainment

TVGrid Jan 26

By Daily Republic Syndicated Content | From Page: B6

 
TVGrid Jan 27

By Daily Republic Syndicated Content | From Page: B7

 
Miss Colombia crowned Miss Universe in Miami

By The Associated Press | From Page: B7

‘Birdman’ tops SAG Awards, Redmayne upsets Keaton

By The Associated Press | From Page: B7

 
Complete list of winners at 21st annual SAG Awards

By The Associated Press | From Page: B7

.

Sports

Curry leads Warriors to 19th straight home win

By The Associated Press | From Page: B1

 
The Week Ahead: Plenty of action close to home

By Paul Farmer | From Page: B1

Serena Williams to meet Cibulkova in Aussie Open quarters

By The Associated Press | From Page: B1

 
Watt gets 2 turnovers, dances in friendly Pro Bowl

By The Associated Press | From Page: B1

Tavares scores 4, Team Toews outscores Team Foligno, 17-12

By The Associated Press | From Page: B1

 
Coach K gets 1,000th win as No. 5 Duke tops St. John’s 77-68

By The Associated Press | From Page: B2

Quinn has led Seattle to record-setting defense

By The Associated Press | From Page: B2

 
Chip Ganassi Racing’s ‘star car’ wins Rolex 24 at Daytona

By The Associated Press | From Page: B2

 
Patriots’ Browner gets a 2nd chance at a Super Bowl ring

By The Associated Press | From Page: B2

Family attorney: Cubs great Ernie Banks died of heart attack

By The Associated Press | From Page: B2

 
Bill Haas pulls away to win Humana Challenge

By The Associated Press | From Page: B2

Jeff Gordon to be Fox guest analyst during XFINITY season

By The Associated Press | From Page: B2

 
Sherman doubts any punishment ahead for Patriots

By The Associated Press | From Page: B2

 
AP Source: Browns WR Josh Gordon fails another drug test

By The Associated Press | From Page: B2

AP Interview: Selig says MLB could expand internationally

By The Associated Press | From Page: B2

 
.

Business

.

Obituaries

Don Johnson

By Nancy Green | From Page: A4, 6 Comments

 
Thomas Clark

By Nancy Green | From Page: A4

.

Comics

Pickles Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Sally Forth Jan 27

By Daily Republic Syndicated Content | From Page: B4

Baldo Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Wizard of Id Jan 27

By Daily Republic Syndicated Content | From Page: B4

Rose is Rose Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Frank and Ernest Jan 27

By Daily Republic Syndicated Content | From Page: B4

Beetle Bailey Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Blondie Jan 27

By Daily Republic Syndicated Content | From Page: B4

Get Fuzzy Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Zits Jan 27

By Daily Republic Syndicated Content | From Page: B4

B.C. Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Peanuts Jan 27

By Daily Republic Syndicated Content | From Page: B4

For Better or Worse Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Dilbert Jan 27

By Daily Republic Syndicated Content | From Page: B4

Garfield Jan 27

By Daily Republic Syndicated Content | From Page: B4

 
Baby Blues Jan 27

By Daily Republic Syndicated Content | From Page: B4

Word Sleuth Jan 27

By Daily Republic Syndicated Content | From Page: B5

 
Sudoku Jan 27

By Daily Republic Syndicated Content | From Page: B5

Cryptoquote Jan 27

By Daily Republic Syndicated Content | From Page: B5

 
Bridge Jan 27

By Daily Republic Syndicated Content | From Page: B5

Crossword Jan 27

By Daily Republic Syndicated Content | From Page: B5

 
Baldo Jan 26

By Daily Republic Syndicated Content | From Page: A6

Baby Blues Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Rose is Rose Jan 26

By Daily Republic Syndicated Content | From Page: A6

Sally Forth Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Dilbert Jan 26

By Daily Republic Syndicated Content | From Page: A6

Zits Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Wizard of Id Jan 26

By Daily Republic Syndicated Content | From Page: A6

Get Fuzzy Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Beetle Bailey Jan 26

By Daily Republic Syndicated Content | From Page: A6

Pickles Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Garfield Jan 26

By Daily Republic Syndicated Content | From Page: A6

B.C. Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
For Better or Worse Jan 26

By Daily Republic Syndicated Content | From Page: A6

Peanuts Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Frank and Ernest Jan 26

By Daily Republic Syndicated Content | From Page: A6

Blondie Jan 26

By Daily Republic Syndicated Content | From Page: A6

 
Cryptoquote Jan 26

By Daily Republic Syndicated Content | From Page: A7

Bridge Jan 26

By Daily Republic Syndicated Content | From Page: A7

 
Word Sleuth Jan 26

By Daily Republic Syndicated Content | From Page: A7

Crossword Jan 26

By Daily Republic Syndicated Content | From Page: A7

 
Sudoku Jan 26

By Daily Republic Syndicated Content | From Page: A7