Fed officials have confirmed the promise of maintaining the basic interest rate close to zero during the "long period" and also confirmed that emergency measures to support the housing market will end as scheduled at the end of this month.
Although the economy and continues to be strengthened, polismeykery noted that "the restoration of the housing market was sluggish at low levels," and "employers are still reluctant to increase the deduction for salaries."
Securities and shares rose as some traders trimmed bets that the central bank will raise interest rates over the next twelve months. Fed Chairman Ben Bernarke trying to determine how long to keep borrowing costs low to create self-sustaining recovery from the worst recession since 1930-ies.
"Recovery is intermittent at best," - said Dine Swank (Diane Swonk), chief economist at Mesirow Financial in Chicago. "Business, finally coming to the stage of spending their cash flow, but the real estate market and better prospects for recovery remain bleak."
Yield ten-year Treasury securities fell by 5 basis points, or 0.05% to 3.65% at 15.44 in New York. The S & P 500 rose by 0.7% to 1,158.51. The June eurodollar contract rose 3 basis points to 98.475.
An earlier report of the Ministry of Commerce showed that housing starts fell by 5.9% in February, which contributed snow storms in some parts of the country, and administration officials, Obama said at a congressional hearing that the unemployment rate probably will remain elevated for a prolonged period .
Growth prospects
According to surveys of economists in a Bloomberg news service this month, the economy will probably grow 2.8% in the first quarter of 2009, after 5.9% growth rate in the fourth quarter of 2009, which served as an impetus for the slower pace of inventory reduction.
Politicians "are still quite concerned about the transition from leaping fluctuations in the cycles of stock movements and fiscal policy to the private final demand," - said Michael Feroli (Michael Feroli), economist at JPMorgan Chase & Co. in New York.
Fed officials have confirmed that their program buying mortgage securities agency in the amount of $ 1.25 trillion and about $ 175 billion of debt agencies will be completed by the end of March.
"The Committee will continue to monitor economic outlook and financial changes, will use its policy instruments needed to support economic recovery and price stability", - said in a statement FOMC.
Retail
Retail sales unexpectedly rose in February, consumer credit grew in January for the first year, commercial mortgage-backed bonds are returned to growth. Meanwhile, the Fed is focused primarily on inflation, which without taking into account fluctuations in the prices of food and energy, slightly varies.
Thomas Hoenig (Thomas Hoenig), Kansas City Fed president, objected to a second meeting in a row, and said that "hopes for a prolonged period of low interest rates on federal funds is not justified because it may lead to the accumulation of financial imbalances and increased risk for long-term macroeconomic and financial stability ", - said in a statement.
The Fed kept the target federal funds rate on overnight loans between banks in the range from 0 to 0.25% from December 2008. Politicians have begun to use the phrase "long-period" from March 2009 and repeated on this day.
Loss of jobs
Economic growth helps to prevent the loss of jobs. Employment decreased an average of 27,000 per month from November to February, compared with 252,000 people from July to October. U.S. could add nearly 300,000 jobs this month, which will be the biggest increase in four years - said David Grinlou (David Greenlaw), chief economist for fixed income at Morgan Stanley, New York.
The unemployment rate remained unchanged at around 9.7% in February.
"Things are definitely going up the hill," - said Jeffrey Immelt (Jeffrey Immelt), CEO of General Electric Co., At a conference in Washington on March 11. "Cases in the credit markets have improved significantly. Most of the indicators are going up or move in this direction.
"However, the long road ahead", with high unemployment and large structural problems "in the economy," said Immelt, who is also a board member of the Federal Reserve of New York.
According to Bloomberg, the borrowers have raised the U.S. corporate bond market to a record $ 1.24 trillion last year. Although in comparison with that pace, there is much lower, but still the issue of bonds increases, an increase of $ 284.3 billion.
Additional yield
According to the indices Bank of America Merrill Lynch, the demand for yield has led investors to demand for corporate bonds, instead of falling yesterday to 267 basis points, the public debt, or 2.67% from a peak of 888 bizisnyh points during the credit crisis in December 2008. The widening gap indicates that the annual interest savings of almost $ 60 million for every $ 1 billion of bonds sold.
Inflation showed some signs of growth. Fed's preferred price index, which includes the cost of food and energy, grew by 1.4% in January compared with a year earlier, and will be below the long term at 1.7% -2%, which are necessary for policy makers in general inflation.
Politicians believe that inflation risks remain low, although some are still worried because of deflation. Inflation expectations have remained stable in recent months, even with the excess capacity in the economy. Inflation expectations for the year ahead, which were formulated by Thomson Reuters University of Michigan Survey, averaged 2.7% over the past six months compared with 2.8% six months earlier.
Labor costs
Officials may also be concerned about the drop in labor costs, - said Marvin Gudfrend (Goodfriend), a former director of research at the Federal Reserve of Richmond. According to a report published earlier this month, the rate of depreciation of the workforce was 5.9% in the fourth quarter.
"We can not say that passed the period when there was a risk of deflation in the cost per unit of labor," - said Gudfrend, who currently works as professor of Carnegie Mellon University's Tepper School of Business in Pittsburgh.
At the end of this month, the Fed's planned purchase of mortgage debt caused a slight change in mortgage rates. The rate on a fixed 30-year mortgage securities fell to 4.95% from 4.97% for the week ending March 11, compared with a record low 4.71% in December.
Bloomberg
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