Posts Tagged inflation
Low Rates Needed for ‘Some Time’
Posted by Tetyana Matychak in Banks on March 9th, 2010
Federal Reserve Bank of Chicago President Charles Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his goal.
“With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “This accommodation will likely be appropriate for some time.”
Fed Chairman Ben S. Bernanke said last month the U.S. economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus fades. At the same time, policy makers are winding down emergency programs and laying plans for an eventual reduction of the Fed’s balance sheet to prevent an increase in inflation as the economy recovers.
The U.S. unemployment rate held at 9.7 percent in February and payrolls dropped 36,000, less than forecast, a sign that the labor market may be stabilizing after a recession that has eliminated 8.4 million jobs. The economy expanded at a 5.9 percent annual pace in the fourth quarter, the fastest rate in six years, the Commerce Department reported last month. Read the rest of this entry »
China takes new steps to curb bank lending
Posted by Tetyana Matychak in Banks on January 15th, 2010
China took new steps Tuesday to control bank lending, ordering institutions to set aside more reserves in a move to avert a surge in credit that Beijing worries might fuel inflation or asset price bubbles.
China’s nascent rebound from the global crisis was fueled by a flood of lending by state-owned banks last year. Bankers cut lending under government orders toward the end of 2009 but regulators worry credit might rebound this year.
The move indicates Beijing is confident growth can be sustained and has shifted focus to preventing financial excesses and economic overheating. The government is forecasting growth of 8.3 percent for 2009, up from a low of 6.1 percent for the first quarter of the year.
The central bank raised the amount of reserves that banks must hold by 0.5 percent to 15 percent of their deposits. Also Tuesday, the bank raised interest rates paid on one-year bills for the first time since August to absorb money from the market and cool credit growth.
“This series of moves by the central bank provides a clear sign that policymakers are following through on their pledge to guide credit in order to pre-empt rising inflation and avoid asset price bubbles,”said Jing Ulrich, chairwoman of China equities for J.P. Morgan, in a report. Read the rest of this entry »
How much you’ll need in retirement
Posted by Tetyana Matychak in Budget, Favourites on January 8th, 2010
Conventional wisdom says you need 80% of your pre-retirement income. But ensuring a comfortable retirement will take more than just a rule of thumb.
Question: I always heard that you will need 80% or so of your working salary to live on in retirement. But is that a percentage of your gross income or your take-home pay? –Mary Taylor, Chalfont, Pennsylvania
Answer: This rule of thumb has long confused many people who are trying to get a handle on their retirement planning. But the question of how much income you’ll need to live comfortably after calling it a career has taken on a special urgency the last year or so as retirement account balances wilted during the market’s meltdown.
After all, if you earn roughly $100,000 a year and take home, say, $80,000 after taxes, the difference between requiring 80% of your gross income ($80,000) and 80% of your net income after taxes ($64,000) is substantial. Unless you’ve got a pretty sizeable nest egg, the difference between coming up with $80,000 a year (plus inflation increases to maintain purchasing power) and $64,000 can have a significant impact on whether your money can support you the rest of your life. Read the rest of this entry »
New 2010 Tax Rates
Posted by Tetyana Matychak in Budget, Favourites on November 25th, 2009
The IRS has announced that tax brackets and benefits will only change a little bit, if any, for 2010.
The law says that tax provisions must change every year to account for inflation. For taxpayers this is a good thing. With this in mind, there are roughly 35 tax benefits that must be adjusted every year. In a normal year this may mean a lot, but since recent inflation has been kept to a minimum there are not many changes in store for next year.
Some of the most important details include:
1. The personal and dependency exemption remains unchanged at $3,650.
2. Standard deduction for heads of household increases from $8,350 to $8,400 in 2010. For others, such as single and married filing jointly, the standard deduction remains the same at $5,700 and $11,400 respectively. Read the rest of this entry »
Maximize savings through bank-account awareness
Posted by Tetyana Matychak in Banks, Favourites on July 29th, 2009
How to save money? Here are some views from Richard Barrington, the primary spokesman and personal finance expert for MoneyRates.com, which examines rates on bank accounts. A freelance writer and novelist, Barrington spent more than 20 years as an investment industry executive. Here’s what he had to say:
Yes, the recession is dragging on, the stock market is sputtering again, and interest rates are low. It’s an era of diminished expectations, one in which we must return to the basics like saving more money — which is about as fun as being told to eat your vegetables.
Feeding your savings account can help you build a little more financial muscle than you might think.
Let’s talk about those low interest rates on your accounts. A 2 percent interest rate with 1 percent deflation these days is worth as much as a 6 or 7 percent interest rate was under normal inflation conditions. You wouldn’t say no to 6 or 7 percent, would you? Because most of us have never seen deflation before, we have to readjust our thinking. Do the math and you’ll see it’s true: 2 percent is the new 6 percent.
Also, because the limit on FDIC deposit insurance has been raised to $250,000 through the end of 2013, it gives you more opportunity for pooling your deposits with one bank. Why is this important? Because banks often offer fee waivers and/or higher interest rates to large depositors. So, as you accumulate money, make sure you use that additional financial muscle to get better deposit terms. Read the rest of this entry »
Gold stays above $920
Posted by Tetyana Matychak in Investing on June 26th, 2009
Gold steadied above $920 on Wednesday, off the previous session’s six-week low as traders awaited the outcome of a key Federal Reserve meeting on interest rates.
The precious metal bounced back from the six-week low of $912.90 as the dollar, the main driver of the current market, was hit by concerns that the Fed would reduce expectations of higher interest rates when it concludes its meeting on Wednesday.
Bullion, which has been sliding since failing to top $1,000 this month, is expected to trade within a narrow range on Wednesday ahead of the conclusion of the Fed’s meeting.
Traders said speculators clearing long positions and receding worries about inflation have pressured gold since it touched a three-month high of $989.80 in early June.
“The gold market’s waiting for material to trade on,” said Koji Suzuki, a senior analyst at SBI Futures Co Ltd. Read the rest of this entry »
World Bank cuts Russia GDP forecast to - 7.9 pct in 2009
Posted by Tetyana Matychak in Currency on June 25th, 2009
The Russian economy will shrink by 7.9 percent in 2009, the World Bank said on Wednesday, a much sharper contraction than the 4.5 percent it forecast earlier.
The Russian economy contracted by 10.2 percent in January-May 2009, according to Economy Ministry estimates, and First Deputy Prime Minister Igor Shuvalov told Reuters on Tuesday the annual contraction may reach 9 percent.
“Given a much larger gross domestic product contraction in the first quarter of 2009 than anticipated, Russia’s economy is likely to contract by 7.9 percent in 2009, despite higher oil prices assumed in the current forecast,” the World Bank said in its quarterly country report.
Russia, the world’s largest energy producer, has been hit hard by the plunge in global demand for commodities, while its banks and many businesses that had borrowed heavily abroad have been squeezed by the global credit crunch.
The World Bank forecast Russia’s jobless rate to rise to 13 percent by the end of this year, from its 9.9 percent May level, and projected Russia would return to “moderate growth” of 2.5 percent in 2010 and 3.5 percent in both 2011 and 2012. It said the economic recovery will be “gradual and prolonged”. Read the rest of this entry »
Dollar Weakens; Stocks Rebound
Posted by Tetyana Matychak in Favourites, Investing on June 24th, 2009
The dollar weakened on concern that the Federal Reserve will signal it has no intention of raising interest rates with the global economy in its worst recession since World War II. Metals rose, buoying emerging-market stocks.
The U.S. currency lost 0.2 percent against the euro at 9:50 a.m. in London, 1 percent versus the Norwegian krone and 0.9 percent compared with the New Zealand dollar. Copper led an advance in industrial metals. The MSCI Emerging Markets Index rose 1.9 percent, the biggest increase in two weeks, and the Dow Jones Stoxx 600 Index of European shares rebounded from its worst two-day decline since April.
“Speculation about ongoing low-rate policy by the Fed is a burden to the U.S. dollar,” a team of analysts led by Viola Stork at Helaba Landesbank Hessen Thueringen in Frankfurt wrote in a research note today. There is an “expectation that the Fed is not going to signal any change in its rate policy today,” the report said.
The chances that the U.S. central bank will increase its target interest rate for overnight loans by the end of the year diminished to 40 percent from 50 percent a week ago, based on trading in Fed funds futures. Policy makers’ determination to prop up the world’s biggest economy prompted investors to seek higher returns outside the U.S. The Organization for Economic Cooperation and Development said today the world’s most- industrialized economies will contract 4.1 percent this year and grow 0.7 percent in 2010. Read the rest of this entry »
Is Inflation Really A Concern?
Posted by Tetyana Matychak in Budget on June 19th, 2009
There is a big debate going on right now on whether we should be concerned with inflation. 10 year Treasury securities have started to creep up recently, but it should come as no surprise as everyone knows that the government will need to sell substantial amounts of debt in the next few years.
There is no question that all the debt the government is piling up will increase inflationary pressures down the road. However, the reason it’s not a problem for the moment because demand is so weak and the fact of the matter is, it could be quite some time before that demand recovers.
The Fed has in the past, shown it’s resolve in fighting inflation and there is no reason to believe that they won’t take the necessary steps to combat it once again if they feel it becomes a problem. The main problem I see down the road is that the economy may be entering in a period of higher interest rates, which will be the likely outcome once all that government debt starts to flood the market.
The Fed will probably have to maintain it’s balance sheet operations and continue to be active participants in the Treasuries market if they don’t want those rates to get out of hand. Even once the recession ends, it’s expected to take a long time for the economy to recover to it’s former level and that time frame may be lengthened if the Fed is forced to raise interest rates sooner than they wish. Read the rest of this entry »
Bond-market rout lifts mortgage cost
Posted by Tetyana Matychak in Favourites, Fund Markets on June 12th, 2009
The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford.
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported. Read the rest of this entry »
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