The USA FRS set a target range of the basic rate from 0 % to 0.25 %
18.12.08 20:02
/INTERFAX-AFI, Washington, December 17, 08/ - Federal Reserve System
(FRS) USA on Tuesday decided to set a target range of the base interest
rate from 0 % to 0.25 % APR, the document to the outcome of the meeting
of the Committee for Open Market (FOMC) says.
Analysts expected decline in rates to 0.5 % from 1% APR.
Rate (discount rate) was lowered by 0.75 percentage point - to 0.5 % APR.
"Since the last meeting of the committee, labor market conditions have
deteriorated, and the available data indicate that consumer spending,
business investment and industrial production declined. Financial markets
remain strained, and credit conditions difficult. Overall, the forecast
economic activity is weakened further", - the document says.
"At the same time, inflation pressures appreciably diminished. In the light of
reducing the cost of energy and other raw materials and weak forecasts of
economic activity, Committee expects inflation to continue weakening in the
coming quarters", - FOMC message says.
"The Federal Reserve System will use all available means to facilitate the
resumption of sustained economic growth and maintain price stability. In
particular, the committee expects that weak economic conditions, it seems,
are the basis for extremely low levels of the basic interest rate for some
time", - the document says.
FOMC said it would focus on "maintaining the functioning of financial
markets and stimulating the economy through "open-market" operations and
other measures that would allow to maintain a balance of FRS at a high
level".
"As previously announced, in the next several quarters the FRS would have
to buy large amounts of agency debt and securities, secured by mortgages,
to provide support to the mortgage market and housing" - the Committee's
message informs.
"The Committee also estimates the potential benefits from the acquisition of
long-term Treasuries. At the beginning of next year, the Federal Reserve
System will also launch the program Term Asset-Backed Securities Loan
Facility to promote loans to homeowners and small businesses.
The Federal Reserve System will continue to use the balance for further
credit market and economic activity support" - FOMC document informs.
American stock indexes accelerated the growth after FRS decision on rate
decreasing to the record low level, at that banks` shares are growing. In
particular, the value of Citigroup shares has grown by 7.6 % and JPMorgan
Chase & Co. - by 9.2 %.
On Tuesday Dow Jones Industrial Average Index at 10:32 p.m. (Moscow
Time) has grown by 2.8 % - to 8802.52 points. Standard & Poor's 500 - by
3.3 % to 897.39 points. Nasdaq Composite - by 3.6 % to 1561.98 points.
Before the decision on the rate, indicators rise made 1.4 - 2.3 %.
Value of the USA treasury obligation is also growing. The yield of 30-years
securities at 10:26 p.m. (Moscow Time) has fallen by 7 b. p. to 2.88 % APR,
2-year's notes - by 12 b. p. to 2.39 % APR.
The USD rate went on falling after the decision, at that it fell to the minimum
for the last two months against euro.
The USD/EUR rate at 10:38 p.m. (Moscow Time) has fallen by 2 % to
$1.3971, compared to $1.3688 on closing market on Monday. Dollar reduced
by 1.3 % to JPY89.5 against Japanese yen, compared to JPY90.65 the day
before.
[2008-12-18]