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FOMC Meeting - Rate Stays Near Zero with No Changes on the Horizon


As expected the Fed kept its target for the federal funds rate at near zero (range of 0% to 0.25%). In addition, the Fed reiterated its intention to keep rates low for some time. Here's an excerpt from yesterday's FOMC policy statement:
The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

With all the government spending and debt, many people believe inflation will soon be a major issue. But the Fed doesn't see it that way. Here's another excerpt:
In light of the declines in the prices of energy and other commodities in recent months and the prospects for considerable economic slack, the Committee expects that inflation pressures will remain subdued in coming quarters. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

With interest rates near zero, the Fed is employing other "tools" to help the economy. There's a long paragraph in the FOMC statement with details. USA Today has a good summary of what actions the Fed has already done and a review of what's being planned.

Other News

Banks are not the only ones having difficulties. The NCUA announced a series of actions designed to enhance and support corporate credit unions. Corporate credit unions operate in the background to service regular credit unions. This WSJ article has more details of this:
In general, credit unions are considered to be among the most conservatively managed financial institutions. Nevertheless, a few of the wholesale credit unions have been hurt by losses on mortgage investments. As a result, regulators took action to minimize the chances of pain spreading.

Another NCUA press release on Tuesday publicized the NCUA Chairman's request to the new Treasury Secretary for TARP aid for credit unions. I can understand how the TARP's focus on large banks is unfair to credit unions, but this request also makes it appear that credit unions may be in more need than what we are told.

Daily News and Deals Post

Thanks to the readers who've commented and sent emails on these and other banking related news stories. Don't forget my list of links to the latest news stories in my Daily News and Deals Post. This is the same post you can use to report banks deals that you've found. It's designed to be a central place for a summary of the latest deals, rate changes and bank news. Links to this post are at the top of the main bank deals page and on the upper right side of the all the pages (comment here on latest deals).

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FiestaMaster   |     |   Comment #1
I submitted it to BankFiesta.com to share with others, thanks!
Anonymous   |     |   Comment #2
The concept of inflation being a good thing drives me from the room screaming and tearing my hair. And don't bother to post them, I already know the arguments of those who make the claim.

This is serious and I'm not wanting or trying to be dramatic. I need counsel:

I have always lived in the USA and I am likely considerably less worldly than others who visit here. Could one of you, out of kindness, mention one or two other countries which are more capitalist today than the USA, a country less socialist than what we have become. Does such a country even exist? Thank you so much.
Anonymous   |     |   Comment #3
" have always lived in the USA and I am likely considerably less worldly than others who visit here. Could one of you, out of kindness, mention one or two other countries which are more capitalist today than the USA, a country less socialist than what we have become. Does such a country even exist? Thank you so much."

Please don't turn this into a political site. There are more than enough of them on the web already.
Most of us visit here to keep a heads up on Bank Deals - Best Rates and Deals.
gaelicwench   |     |   Comment #4
Anonymous' posting at 12:01 was in no way alluding to politics. Socialist vs. capitalist can also mean the financial state of how much and why people are taxed like they are, where their taxes are going to, such as health care, college education, retirement years, etc.

Relax, mmmkay? ;-)
Anonymous   |     |   Comment #5
If you are looking for a laissez-faire capitalist country, I don't think that there is such a country now in the world. The USA was in a "return to normalcy" era just before the Great Depression. I guess maybe Luxembourg would come closest to a perfect capitalist country now?
Anonymous   |     |   Comment #6
I posted above. Please, I beg you, rest assured my post was not about politics. I consider that war lost and I only have a limited number of years remaining. I appreciate the thought of Luxembourg, which never would have occurred to me. And, yes, my inquiry goes very much to the issue of preserving my savings, about which I worry now more than ever before. I did get through 2008 OK. But the future here frightens me. Thanks.
Mocirne   |     |   Comment #7
It definitely frightens me as well, 4:52. There is no way to tell where this ungodly massive influx of money combined with the tight interweaving of government with big business will take us. All it takes is little steps, over decades.

As for the very short term, I'm hoping inflation will take hold very shortly and drive up the interest rates by 3rd/4th quarter 2009, but that can only happen when banks decide to get brave and release their bailout funds to us in the form of relaxed lending standards.
Anonymous   |     |   Comment #8
On Positive note, there are three types of money supply in circulation today: Short or M1, intermediate or M2 and Long or M3, all tide up by economic indicators.

The Feds are printing and pumping the M1 money supplies to replenish the lost money from lower house prices and fall in almost all investments, which in turn does not create inflation.

When the saturation point is reached, the Feds will print the M3 supplies of money, tied to long term interest rate, e.i. starts to buy long term treasuries. This will decrease the long term interest rate and increase the short rates.

The M2 money that the FEDs will create or print are the inflationary. When this supply start to increase, the inflation will go through the roof.

We are not there yet, so relax and enjoy for the moment. The doomsday scenario is not far fetched either, so be on lookout for M2 money supply. When you see it rising, exit or don't buy any CDs, it will be a loosing propositions for all of us, since the dollar will loose its purchasing power.
Anonymous   |     |   Comment #9
How about a repeat of the early 1980's with massive deficits and skyrocketing inflation and interest rates over 10%? The financial crisis is not a US only problem. Iceland's government collapsed as a result of the crisis. People were protesting in Latvia and Eastern Europe about the economy. Foreclosures are high in England. Factories are laying off thousands of workers in Asia. The money transfers to Mexico dropped by over a billion dollars last year from immigrant workers here. As for purchasing power of the dollar, who knows how that will go in the immediate future? If you want to move to the "best country on this planet", then Denmark was given that status in a Money magazine article.