Alan and Ben’s excellent rate adventure

first_img AD Quality Auto 360p 720p 1080p Top articles1/5READ MORESanta Anita opens winter meet Saturday with loaded card160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! As the Federal Reserve undergoes a historic transition, the outlook for interest rates is getting cloudier. At its meeting Tuesday, the Fed is likely to raise its shortterm rate target to 4.5% from 4.25%, marking the 14th straight quarter-percentagepoint boost. But after this, it won’t be simple for the Fed to decide if it should raise rates, lower them or leave them alone. That’s because rates aren’t clearly too low or too high, and the economy appears strong while inflation is contained. All this is happening just as Ben Bernanke is scheduled to succeed Alan Greenspan as Fed chairman Wednesday. Mr. Bernanke is committed to being clearer about the Fed’s actions and goals, and has previously said he would like the Fed to announce an explicit inflation target. Yet such an unclear interest-rate outlook means Mr. Bernanke, despite his best efforts, may not be able to give much guidance to the market. Figuring out the path of interest rates has been unusually easy since June 2004. Back then, the Fed’s target for the federal funds rate, charged on overnight loans between banks, was 1% and it was clear that this rate was going to have to rise. Fed officials described the rate as “accommodative” that is, below some “neutral” level that neither stimulates nor restrains economic growth. No Hurry At the time, unemployment was relatively high, wages were growing sluggishly and worker output was rising rapidly, meaning it was easy for firms to boost sales and profits without having to raise prices. That all suggested inflation wasn’t about to take off, so the Fed could take its time raising rates. Increases, the Fed said, would be “at a pace that is likely to be measured.” From June 2004 until November 2005, it repeated that rates were “accommodative” and would rise at a “measured” pace. But by December, the federal funds rate had moved into a zone closer to “neutral,” often estimated as between 3.5% and 5.5%. So the Fed changed its message that month: it no longer said rates were “accommodative” although it said “some further measured policy firming is likely to be needed.” In minutes to the meeting, released earlier this month, Fed officials said, “the number of additional firming steps required probably would not be large.” What did these changes in language mean? Federal Reserve Bank of Richmond president Jeffrey Lacker said nine days ago they mean “at least one” more rate increase is in store, but then the Fed is “going to enter a period where there’s a little more uncertainty.” Futures markets, which trade financial contracts based on expected future rates, put the odds of an increase Tuesday near 100%. They show 72% odds that the Fed will boost the rate again, to 4.75%, at its March 28 meeting, Mr. Bernanke’s first as chairman. Economists are divided. A survey by the National Association for Business Economics last week of 142 members found about a third expect the Fed funds rate to peak at 4.25% or 4.5%, about a third expect it to peak at 4.75%, and a third look for it to top out at 5% or higher. Whither Bonds? Where the funds rate peaks may affect the yields on longerterm bonds. At 4.5% Friday, 10-year Treasury yields are about the same as they were when the Fed started raising rates in 2004. If the Fed stops at 4.5%, then bond yields might drop. If it continues to 5%, bond yields will probably rise toward that level to remain attractive to investors who would otherwise gravitate toward the higher returns and lower risk of shorter-term investments. But the bond market’s behavior has surprised many people, including Fed officials, in the last year, and may continue to defy conventional wisdom. (For more on bond investing, see the book excerpt on the next page.) Those expecting this week’s increase to be the last cite the fact that the economy slowed sharply in the fourth quarter, to a 1.1% annual rate of growth, and that high energy prices and a cooling housing market are likely to undercut consumer spending this year, damping overall growth. “The economic data and anecdotal reports so far in this New Year suggest the economy is losing momentum and inflation at the core consumer level remains remarkably tame,” Kathleen Bostjancic, an economist at Merrill Lynch, said in a recent report. Economists who expect the Fed to keep raising rates after this week argue that higher energy prices are starting to push up other costs and prices. They say the economy will bounce back in the current quarter and has no spare capacity left to absorb significant additional demand. These economists also note that “core” inflation, which excludes food and energy, is in the upper part of Mr. Bernanke’s 1% to 2% tolerance zone. Finally, they argue that Mr. Bernanke has a big incentive to look and act tough on inflation in his first months in office. While a Fed governor from 2002 to 2005, Mr. Bernanke highlighted the dangers of, and remedies for, deflation, which involves generally declining prices the opposite of inflation. Central bankers can ill afford to appear soft on inflation, which erodes the dollar’s purchasing power: inflation-fearing investors might sell bonds, driving their yields up, and push the dollar down on foreign currency markets. An Update to Congress Mr. Bernanke is scheduled to deliver the Fed’s semiannual monetary policy report to Congress on Feb. 15 and 16, providing the first detailed look at his economic views during his chairmanship. Given the crosscurrents in the economy, he may not be able to be as explicit as the Fed has been for the last year and a half about the direction of rates. But he will probably still be easier to understand than Mr. Greenspan, whose vague pronouncements and avoidance of precise numbers made him difficult to interpret. “Bernanke will be more open, less Delphic than Greenspan,” predicts Nariman Behravesh, chief economist at Global Insight, an economic analysis firm based in Lexington, Mass. A big question is what, if anything, the Fed says about future interest-rate moves after its meeting Tuesday. Fed officials still generally feel inflation is more likely to go up than down, so they may want to emphasize a readiness to raise rates further, if necessary. But several economists say Fed officials won’t convey the same commitment to raising rates as they have in the past.Alan and Ben’s Excellent Rate Adventurelast_img read more

Steven Adams, Russell Westbrook lead Thunder to rout of Pistons

first_imgBig 3 Durant, Curry, Thompson lead Warriors to 128-111 win over Atlanta SEA Games: PH dancesport looking to sweep golds MOST READ Don’t miss out on the latest news and information. Judiciary Committee set to take over Trump impeachment probe Adams made his first seven field-goal attempts, along with five free throws, and forced Drummond and Zaza Pachulia to the bench with four fouls each. The Pistons finished the third quarter with Griffin at center and 6-foot-7 Stanley Johnson at power forward.TIP-INSThunder: Oklahoma City is 15-5 against the Pistons since leaving Seattle. … The Thunder, who came into the game with the league’s best defensive rating, are now 4-0 when holding their opponents under 90 points.Pistons: Detroit fell short of its first seven-game home winning streak since March 14-April 4, 2008. … Drummond went 1-for-2 from the free-throw line and has now missed 19 of his last 24 attempts.UP NEXTADVERTISEMENT Thunder: At the Brooklyn Nets on Wednesday night.Pistons: At the Milwaukee Bucks on Wednesday night. Another case filed vs Cardema Blake Griffin led Detroit with 20 points, while Andre Drummond added 13.Detroit came into the game having won six straight at home, including the first five games on its current homestand, but fell six points short of its previous season low.FEATURED STORIESSPORTSPrivate companies step in to help SEA Games hostingSPORTSSEA Games: Biñan football stadium stands out in preparedness, completionSPORTSUrgent reply from Philippine ‍football chiefThe Thunder led 50-40 at halftime behind 14 points from Adams and 10 from Jeremi Grant. Griffin had 15 points for Detroit, which shot 34.7 percent from the floor.Detroit’s offense continued to struggle in the second half without Reggie Bullock, who left the game in the first quarter with an ankle injury. The Thunder took a 71-51 lead midway through the third quarter and led by 28 at the end of the period. In the fourth, Oklahoma City led by as many as 35. SEA Games: Biñan football stadium stands out in preparedness, completion Read Next Fossil launches its newest generation smartwatch: The Gen 5 Jordan delivers on promise: 2 Cobra choppers now in PH Hotel says PH coach apologized for ‘kikiam for breakfast’ claim LATEST STORIES Oklahoma City Thunder forward Abdel Nader (11) runs into Detroit Pistons guard Bruce Brown (6) during the second half of an NBA basketball game, Monday, Dec. 3, 2018, in Detroit. (AP Photo/Carlos Osorio)DETROIT— Steven Adams scored 21 points, Russell Westbrook added 18 and the Oklahoma City Thunder ended the Detroit Pistons’ five-game winning streak with a 110-83 victory Monday night.Paul George added 17 points for the Thunder, who are 15-3 since losing their first four games.ADVERTISEMENT Robredo: True leaders perform well despite having ‘uninspiring’ boss PLAY LIST 02:49Robredo: True leaders perform well despite having ‘uninspiring’ boss02:42PH underwater hockey team aims to make waves in SEA Games01:44Philippines marks anniversary of massacre with calls for justice01:19Fire erupts in Barangay Tatalon in Quezon City01:07Trump talks impeachment while meeting NCAA athletes02:49World-class track facilities installed at NCC for SEA Games Hotel management clarifies SEA Games footballers’ kikiam breakfast controversy View commentslast_img read more