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Bernanke's Testimony - No Signs of Higher Interest Rates


Federal Reserve chairman Ben Bernanke testified before Congress yesterday. There weren't any signs of higher interest rates any time soon. As long as unemployment remains high, the Fed will likely hold steady with interest rates near zero. Here are a few excerpts from Bernanke's testimony:
Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC participants' views of the longer-run sustainable rate. All participants expect that inflation will be somewhat lower this year than in recent years, and most expect it to remain subdued over the next two years.

In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery. Accordingly, as I mentioned earlier, the FOMC believes that a highly accommodative stance of monetary policy will be appropriate for an extended period.

Bernanke also had an opinion piece titled "The Fed's Exit Strategy" in yesterday's Wall Street Journal. He again repeated the line of no tightening of monetary policy for an extend period of time:
Overall, the Federal Reserve has many effective tools to tighten monetary policy when the economic outlook requires us to do so. As my colleagues and I have stated, however, economic conditions are not likely to warrant tighter monetary policy for an extended period. We will calibrate the timing and pace of any future tightening, together with the mix of tools to best foster our dual objectives of maximum employment and price stability.

It seems likely that depositors are going to have to live with low interest rates until we see significant improvements in the economy and unemployment. That may take until 2011 or 2012.

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Bozo   |     |   Comment #1
To: All
Re: Interest Rates

Who would have thought we'd look back to 4% CDs as "the good old days"?

Chins up, we motor on, safe in the knowledge we're diversified.

Hmmm, you folks are diversified.


Cash took a bit of a beating the last ten days or so.

Regards to all savers,

Anonymous   |     |   Comment #2
U.S. Senate Bill #604 Audit the Federal Reserve
Anonygal   |     |   Comment #3
Diversified?? Oh, you mean like making sure all CDs are with different banks?? That is the only safe way I know of to be diversified these days. And it helps to make sure your banks have good ratings even if they are FDIC insured. I like this kind of diversification!
Anonymous   |     |   Comment #4
Bozo, the market may have risen lately, but a lot of my friends are still waiting to get back to their break even point from the beating they took a year or two ago.

I'll stick with my CDs. And another benefit, I don't loose any sleep worrying about what the markets will do the next day.
Bozo   |     |   Comment #5
To: Anonymous at 3:05 pm
Re: I agree, sort of

The point of diversification is to never lose sleep, period. If you're totally in cash these days, you lose sleep over the market. If you're totally in the market, you lose sleep over the market.

So, my remedy was to diversify.

I keep a tad in well-laddered CDs, a tad in stocks, a tad in bonds.

Works for me.

Bozo   |     |   Comment #6
PS: Re-balance, BTW

When you get a bit out-of-whack, you re-balance. Since stocks have gone ballistic the past two weeks, I took a bit "off the table".

I usually do this only once a year, but this market is weird.

So I moved a tad more into cash.

Cash is nice.

Anonymous   |     |   Comment #7
You want to know why bank deposit rates are so low?? Just take a look at the sheer number of MORONS and IDIOTS willing to part with their money over a paltry 1 - 2 and 3 percent. The fools are standing in lines around the corner trying to give their money to banks offering 2%. What a bunch of bumbling idiots. And then we wonder how banks are able to do it and how the FDIC can get away with regulating how much a bank pays out in deposit rates. The so called "Free Market" is not so free.

As long as you chumps, morons and idiots lining up to give their money away and as long as you have idiots who do not know how to save their money for a rainy day (after all it is because of these idiots we had runaway inflation in housing for the last decade -- a fool and his money shall soon part).

4% CDs??? What a crock of you know what. With TRUE inflation above 5, only a total idiot would lock their money up in a CD paying 4%. ONLY AN IDIOT.
Anonygal   |     |   Comment #8
If you think WE are the MORONS and IDIOTS, why do YOU waste your time posting here?

Maybe we need the income from CDs to live on so we learn to budget better and live on lower rates until the Fed raises rates. By the way, before you call us names why don't you do your research and learn what the REAL reason is for low CD rates?
If you really want to see an IDIOT, why don't you look in the mirror?
Anonymous   |     |   Comment #9
Good one, Anonygal!
Absolutely right.
Anonymous   |     |   Comment #10
Bozo, you do what ever works for you and makes you happy.
Myself, I monitor this site purely for Banking Guy's savings and CD rate watch. And what a great job he does.
If I wanted more diversified financial investing advice there are other sites that specialize in exactly that.
Anonymous   |     |   Comment #11
Look at all of the "intelligent" sheep supporting each other's brainless banter.

Stop giving your money away to banks - SHEEP!

2 - 4% apy is a JOKE. Esp when there are 5% cds available -- except you wouldn't know where to find them since you're too busy following the OTHER SHEEP around looking at these ridiculous rates.

I love how the word "competitive" thrown in to make it sound more appealing.
Anonygal   |     |   Comment #12
BAAAA! I think I saw that 5%cd but it was for over 20 years!! If I keep reading your posts, I don't think I'll have 20 years left! I sure think Bankguy would have shared it with us if he knew of your great 5% CD. Why aren't you sharing? Isn't that what this site is all about? Or is your bank on Mars??
Anonymous   |     |   Comment #13
actually, the best cd rate banking guy posted this month, is 12%. Maybe the anonymous brainiac sheep hater can figure out how to open a thousand different accounts at that institution... you know, if they let him out of "his" institution for an afternoon walk or something
Anonymous   |     |   Comment #14
nice answer ;-)