Top Interest Rate Headlines 12-14-10: Fed holds rate target, bond-buy plan steady

Fed holds rate target, bond-buy plan steady
By Greg Robb, MarketWatch
The Federal Reserve Tuesday left its key interest rate and the size of its bond purchase program unchanged, as widely expected. The central bank's rate-setting Open Market Committee maintained the target range for the federal funds rate at its all-time low range of 0 to 0.25%, where it has stood since December 2008. It kept its bond purchase program, nicknamed QE2, at $600 billion. In its statement, the Fed said that the economy recovery is continuing "though at a rate that has been insufficient to bring down unemployment." Thomas Hoenig, the president of the Kansas City Fed, dissented again, warning that the large stimulus could cause inflation expectations to rise and choke off a recovery.
http://jlne.ws/gEzprz

Fed Leaves Policy Unchanged
BY LUCA DI LEO, JON HILSENRATH AND JEFFREY SPARSHOTT, WSJ.com
Federal Reserve officials stuck to their easy-money policy of buying U.S. Treasury bonds and keeping short-term interest rates near zero amid new signs that the recovery is gathering some steam.
http://jlne.ws/hjpqy6

FOMC statement - December 14, 2010
Press Release
Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.
http://jlne.ws/g1hn1y

Pimco's Government-Related Holdings Rise In Flagship Fund
WSJ.com
Bond fund giant Pacific Investment Management Co. boosted the U.S. government-related holdings in November in its flagship bond fund after cutting them for four straight months. The U.S. government-related holding for Pimco's flagship Total Return Fund, the world's biggest bond fund with $250.2 billion in assets, rose to 30% in November from 28% in October, according to data available on the company's website Tuesday.
http://jlne.ws/dOIjUC

Why are government bond yields rising?
The Economist
This week, government bond yields have risen around the world, on the debt of troubled European countries but also for relative safe havens like Germany and the US. Why have yields risen? Are different factors at work in different countries? Will there be additional sovereign debt crises in 2011? And will an American crisis be among them?
http://jlne.ws/hhjKzd

The core aim of UK economic policy – to stop house prices from falling
MoneyWeek
Wondering where your government's priorities lie? Then consider the interim report out from the Office of Tax Simplification on how they might go about changing the hundreds of tax reliefs on offer at the moment.
http://jlne.ws/i3pGry

Belgium Has S&P Outlook on Debt Cut to `Negative' Amid Political Stalemate
By John Martens, Bloomberg
Belgium had the outlook on its debt rating lowered to “negative” from “stable” at Standard & Poor’s Ratings Services because the country’s political stalemate makes it vulnerable to rising borrowing costs.
http://jlne.ws/hReaK2

Canadians With More Debt Than U.S. Spark Policy Makers' Warning
By Theophilos Argitis and Greg Quinn, Bloomberg
Canada’s top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.
http://jlne.ws/gGUnfJ

Bernanke Options May Be Limited Amid Republican Scrutiny
By Caroline Salas, Bloomberg
Federal Reserve Chairman Ben S. Bernanke may find his options for reducing unemployment near a 26-year high are constrained after Republicans take control of the House of Representatives next month.
http://jlne.ws/gLhyrv

Inventories at U.S. Companies Increase 0.7%, Less Than Forecast
By Bob Willis, Bloomberg
Inventories in the U.S. rose less than forecast in October, restrained by the biggest drop in retail stockpiles in more than a year as merchants had trouble keeping up with surging demand.
http://jlne.ws/eDJ4pe

IMF Managing Director Dominique Strauss-Kahn Welcomes Mexico's Request to Expand Flexible Credit Line to US$73 Billion
“I welcome the Mexican authorities’ indication, underscored by President Felipe Calderón this morning, that Mexico is interested in taking advantage of the recent reforms to the Fund’s Flexible Credit Line (FCL) facility to replace its existing one-year, SDR 31.5 billion (about US$47 billion, equivalent to 1,000 percent of quota) precautionary FCL arrangement with a two-year precautionary FCL arrangement in the amount of SDR 47 billion (about US$73 billion, or 1,500 percent of quota)...."
http://jlne.ws/fLhTVM

Fed meets today, will review its $600B bond-buying program
By Jeannine Aversa, AP
After launching a much-criticized $600 billion bond-buying program last month to bolster the economy, the Federal Reserve is taking stock of how it's working.
http://jlne.ws/fX496f

Blackstone Names Asia Private-Equity Chief
BY AMY OR, WSJ.com
Blackstone Group LP has named Senior Managing Director Michael Chae as head of private equity in Asia. Mr. Chae also will be responsible for the firm's limited-partner marketing personnel and coordinate relationships with its most important limited partners in the region, Blackstone said in a statement Monday.
http://jlne.ws/hU2vxv

Japan's Sengoku Deflects Pressure From Bank of Japan
BY YUKA HAYASHI, WSJ.com
The chief spokesman for Japan's government said additional monetary easing, including setting an inflation target, won't help Japan conquer deflation. He also suggests Tokyo won't press the Bank of Japan for more steps to prop up the economy anytime soon.
http://jlne.ws/dHmlzN

ECB's Trichet Urges EU to Enhance Bailout Fund
BY GEOFFREY T. SMITH, WSJ.com
European Central Bank President Jean-Claude Trichet called on European Union governments to enhance the financial rescue vehicle they set up in the wake of the Greek debt crisis.
http://jlne.ws/gmxlRM

Retail Sales, Producer Prices Increase
By JEFF BATER And LUCA DI LEO, WSJ.com
U.S. holiday shoppers streamed into malls and cyberspace in November, giving the economy a kick as merchants reported better-than-expected sales. Retail sales increased by 0.8% last month, the Commerce Department said Tuesday. The gain was better than the 0.5% increase that economists surveyed by Dow Jones Newswires had projected.
http://jlne.ws/gs5doI