Selasa, 26 Juni 2012

CNNMoney economy blog

The Federal Reserve announced Wednesday that it plans to extend "Operation Twist," a bond-swapping strategy designed to keep interest rates low in the future, thereby providing a measure of stimulus to the struggling economy.

Originally scheduled to end later this month, the program -- which swaps short-term bonds for ones with longer duration -- will now run through the end of the year.

Fed Chairman Ben Bernanke is expected to provide more details about the committee's deliberations during a press conference scheduled to begin at 2:15 p.m. ET. Watch here for developments (shortly after) they happen.

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3:00 p.m. ET: It's over. Our 45 minutes with the Fed chief are up. Bernanke has left the building. Until next time ...

2:58 p.m. ET: CNNMoney's own Jennifer Liberto gets a question. She asks about Operation Twist's impact on consumer lending and bank earnings.

"I have heard the argument by lowering interest rates, you make it unattractive to lend. I don't think that is right," Bernanke says, arguing that lower Fed lending rates encourage banks to look elsewhere for higher returns.

2:56 p.m. ET: Some lighter fare:

Eh, probably.

2:54 p.m. ET: Between talk of Europe and the fiscal cliff, this news conference underscores just how little control the Fed has over the current economic situation.

The latest on Europe?

"We hope it doesn't get worse," Bernanke says. "It is already one of the factors that has been a drag on U.S. recovery, but not the only factor."

2:48 p.m. ET: Bernanke is asked about JPMorgan and the Volcker Rule, and says the trade may have been prevented as banks will have to explain hedges before they are made.

"One aspect of the rule that might have been relevant, and again we are still looking at that situation as are DOCC and others, it would have been the control of the governance aspects of it," Bernanke said. "That might have potentially changed the outcome."

Safe to say that number is not 8.2%.

2:40 p.m. ET: Bernanke offers a list of factors prohibiting economic growth, including comments on the housing market:

"Housing does seem to be doing somewhat better, there are some good signs there," he said. "But nevertheless we're not getting the size of the boost, the amount of help in the recovery we would normally get from a housing recovery."

2:36 p.m. ET: The discussion turns to the so-called fiscal cliff. Bernanke says the committee is already hearing anecdotal reports about the impact fiscal uncertainty is having on government contractors.

CNNMoney tackled this issue recently. Our story is here.

2:33 p.m. ET: Bernanke is asked directly about Europe. "At this point we are mostly just in consultation mode," he says, noting frequent consultations with European central bankers.

2:30 p.m. ET:

Bernanke says policymakers need more data. "We are prepared to do more. We need further information about the state of the economy, where things are going, about what is happening in Europe."

2:28 p.m. ET: Hopes that Bernanke's presser would be a presidential politics-free zone were just dashed as Bernanke is asked about Mitt Romney's criticisms of the Federal Reserve.

Bernanke doesn't bite: "I reiterate the Federal Reserve is nonpartisan and makes decisions based on purely economic grounds without political consideration. And we will continue to do that," he says.

2:25 p.m. ET: Bernanke: "We welcome help and support from any other part of the government." Translation: The Fed would really like Congress to help provide some measure of support.

2:23 p.m. ET: First mention of Europe, but Bernanke doesn't elaborate on how big of a threat the continent's debt crisis poses to the United States.

2:20 p.m. ET: On to questions. CNBC asks whether the Fed has acted decisively enough during recent years.

Bernanke says the Fed's actions today are a "substantive step" and that the central bank is "prepared to do what is necessary to provide support for the economy."

2:15 p.m. ET: Here we go. Bernanke opens with a recap of the committee's statement and lower economic projections.

2:00 p.m. ET: The Fed just released forecasts that predict the economy will grow at a slower rate than previously thought. Gross Domestic Product growth for this year is now forecast to be 1.9% to 2.4%. In April, rates of 2.4 % to 2.9% were expected.

The Fed showed similar pessimism on the unemployment rate, which is now forecast to be between 8.0% and 8.2% this year. In April, a rate of 7.8% to 8.0% was projected.

1:10 p.m. ET: What will Bernanke be asked at the news conference? Let's check the Twitter feeds of a few economists and reporters who cover the Federal Reserve for hints.

Here's economist Justin Wolfers:

The most recent jobs report, for the month of May, was particularly poor. Expect Bernanke to be asked about that, especially given the Fed's mandate to support employment.

It's also likely that Bernanke will be asked to provide some friendly advice for fiscal policymakers. In the past, the Fed chief has not been shy about calling out Congress over its inaction, a theme that could resurface today.

And here is an interesting note from CNNMoney's Annalyn Censky, who points out that the Fed is running out of short-term bonds to swap.


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